Economic Survey & Union Budget: Priorities & Recommendations Fodder Material

ECONOMIC SURVEY & UNION BUDGET:
PRIORITIES & RECOMMENDATIONS

FODDER MATERIAL
1|P a g e W W W . E D U T A P . C O . I N QUERY? HELLO@EDUTAP.CO.IN / 8146207241

Contents
1 Union Budget 2021-22 ...........................................................................................................................4
1.1 Health and Wellbeing......................................................................................................................5
1.1.1 Vaccines ...................................................................................................................................5
1.1.2 Health Systems ........................................................................................................................5
1.1.3 Nutrition...................................................................................................................................6
1.1.4 Universal Coverage of Water Supply .......................................................................................6
1.1.5 Swachch Bharat, Swasth Bharat ..............................................................................................6
1.1.6 Clean Air ...................................................................................................................................6
1.1.7 Scrapping Policy .......................................................................................................................6
1.2 Physical and Financial Capital and Infrastructure ...........................................................................6
1.2.1 Production Linked Incentive scheme (PLI) ..............................................................................6
1.2.2 Textiles .....................................................................................................................................7
1.2.3 Infrastructure ...........................................................................................................................7
1.2.4 Roads and Highways Infrastructure.........................................................................................8
1.2.5 Railway Infrastructure .............................................................................................................9
1.2.6 Urban Infrastructure ................................................................................................................9
1.2.7 Power Infrastructure .............................................................................................................10
1.2.8 Ports, Shipping, Waterways ...................................................................................................10
1.2.9 Petroleum & Natural Gas.......................................................................................................10
1.2.10 Financial Capital .....................................................................................................................11
1.2.11 Increasing FDI in Insurance Sector.........................................................................................11
1.2.12 Stressed Asset Resolution ......................................................................................................11
1.2.13 Recapitalization of PSBs .........................................................................................................11
1.2.14 Deposit Insurance ..................................................................................................................11
1.2.15 Company Matters ..................................................................................................................11
1.2.16 Disinvestment and Strategic Sale ..........................................................................................12
1.2.17 Government Financial Reforms .............................................................................................12
1.3 Inclusive Development for Aspirational India ...............................................................................12
1.3.1 Agriculture .............................................................................................................................12
1.3.2 Fisheries .................................................................................................................................13
1.3.3 Migrant Workers and Labourers ...........................................................................................13
1.3.4 Financial Inclusion..................................................................................................................14
1.4 Reinvigorating Human Capital ......................................................................................................14

1.4.1 School Education ...................................................................................................................14
1.4.2 Higher Education ...................................................................................................................14
1.4.3 Scheduled Castes and Scheduled Tribes Welfare..................................................................14
1.4.4 Skilling ....................................................................................................................................14
1.5 Innovation and R&D ......................................................................................................................15
1.6 Minimum Government, Maximum Governance ..........................................................................15
1.7 Tax Proposal ..................................................................................................................................16
1.7.1 Direct taxes ............................................................................................................................16
1.7.2 Indirect Taxes .........................................................................................................................17
1.8 Achievements and Milestones during the COVID-19 pandemic ..................................................19
1.9 Vision for AatmaNirbhar Bharat ...................................................................................................20
1.10 Union Budget 2021-22: Analysis ...................................................................................................22
1.10.1 Union Budget 2021-22: Analysing Key Numbers...................................................................22
1.10.2 Union Budget 2021-22: Looking through a gender lens........................................................30
1.10.3 Union Budget 2021-22: How to Increase Income Tax Collection? ........................................32
1.10.4 Union Budget 2021-22: Is Infra Spending a Panacea for all Ills? ...........................................33
1.10.5 Union Budget 2021-22: Insufficient allocation to Health and Education Sector ..................35
1.10.6 Union Budget 2021-22: Is it sufficiently pro-poor? ...............................................................36
1.10.7 Union Budget 2021-22: Are we shifting away from welfarism? ...........................................37
1.10.8 Union Budget 2021-22: The Good and the Bad.....................................................................38
1.10.9 Union Budget 2021-22: Does it Address Structural Issues? ..................................................39
1.10.10 Union Budget 2021-22: An unfinished agenda on jobs and skills .....................................40
1.10.11 Union Budget 2021-22: A need to correct subsidy bias in Agriculture?............................41
1.10.12 Union Budget 2021-22: Does budget fulfill needs of an ailing economy? ........................42
1.10.13 Union Budget 2020-21: Analysing the Financial Proposals ...............................................44
2 Economic Survey 2020-21 ....................................................................................................................45
2.1 Saving Lives and Livelihoods amidst a Once-in-a-Century Crisis ..................................................45
2.2 Does Growth lead to Debt Sustainability? Yes, But Not Vice- Versa! ...........................................46
2.3 Does India’s Sovereign Credit Rating Reflect Its Fundamentals? No! ..........................................49
2.4 Inequality and Growth: Conflict or Convergence? .......................................................................50
2.5 Healthcare takes Centre Stage, Finally! ........................................................................................51
2.6 Process Reforms ............................................................................................................................53
2.7 Regulatory Forbearance an emergency medicine, not staple diet! .............................................54
2.8 Innovation: Trending Up but Needs Thrust, Especially from the Private Sector ..........................55

2.9 JAY Ho: Ayushman Bharat’s Jan Arogya Yojana (JAY) and Health Outcomes ...............................56
2.10 The Bare Necessities .....................................................................................................................57
2.11 State of the Economy 2020-21: A Macro View .............................................................................60
2.12 Fiscal Developments .....................................................................................................................62
2.13 External Sector ..............................................................................................................................64
2.14 Monetary Management and Financial Intermediation ................................................................67
2.15 Prices and Inflation .......................................................................................................................68
2.16 Sustainable Development and Climate Change............................................................................71
2.17 Agriculture & Food Management .................................................................................................74
2.18 Industry and Infrastructure ...........................................................................................................77
2.19 Services .........................................................................................................................................79
2.20 Social Infrastructure, Employment and Human Development.....................................................80
Note: How to Use this Document?

1. Sections 1.1-1.9 provides objective information regarding Union Budget 2021-22. This can be helpful
for answering objective MCQ type questions. Remembering this information can also be helpful in
answering descriptive type questions.
2. Section 1.10 on ‘Union Budget 2021-22: Analysis’ contains analytical information in question-
answer format. This section can be helpful for answering descriptive type questions.
3. Sections 2.1-2.20 contains a summary of individual chapters of Economic Survey 2020-21. Knowing
this section well can help in answering both objective and descriptive type questions.
4. This is a long chapter because it tries to cover the entire gamut of Indian economy. If done well, this
chapter will also help in answering questions pertaining to other chapters in the syllabus.
1 Union Budget 2021-22

Presenting the first ever digital Union Budget, Union Minister of Finance and Corporate Affairs Smt.
Nirmala Sitharaman stated that India’s fight against COVID-19 continues into 2021 and that this moment
in history, when the political, economic, and strategic relations in the post-COVID world are changing, is
the dawn of a new era – one in which India is well-poised to truly be the land of promise and hope.
The key highlights of the Union Budget 2021-22 are as follows:
6 pillars of the Union Budget 2021-22:

1. Health and Wellbeing
2. Physical & Financial Capital, and Infrastructure
3. Inclusive Development for Aspirational India
4. Reinvigorating Human Capital
5. Innovation and R&D
6. Minimum Government and Maximum Governance
1.1 Health and Wellbeing

• Rs. 2,23,846 crore outlay for Health and Wellbeing in BE 2021-22 as against Rs. 94,452 crore in BE
2020-21 – an increase of 137%
• Focus on strengthening three areas: Preventive, Curative, and Wellbeing
Steps being taken for improving health and wellbeing:
1.1.1 Vaccines
• Rs. 35,000 crore for COVID-19 vaccine in BE 2021-22.
• The Made-in-India Pneumococcal Vaccine to be rolled out across the country, from present 5 states
– to avert 50,000 child deaths annually.
1.1.2 Health Systems

• Rs. 64,180 crore outlay over 6 years for PM Aatma Nirbhar Swasth Bharat Yojana – a new centrally
sponsored scheme to be launched, in addition to NHM.
• Main interventions under PM AatmaNirbhar Swasth Bharat Yojana:
o National Institution for One Health
o 17,788 rural and 11,024 urban Health and Wellness Centers
o 4 regional National Institutes for Virology
o 15 Health Emergency Operation Centers and 2 mobile hospitals
o Integrated public health labs in all districts and 3382 block public health units in 11 states
o Critical care hospital blocks in 602 districts and 12 central institutions
o Strengthening of the National Centre for Disease Control (NCDC), its 5 regional branches and
20 metropolitan health surveillance units.
o Expansion of the Integrated Health Information Portal to all States/UTs to connect all public
health labs
o 17 new Public Health Units and strengthening of 33 existing Public Health Units
o Regional Research Platform for WHO South-East Asia Region
o 9 Bio-Safety Level III laboratories

1.1.3 Nutrition
• Mission Poshan 2.0 to be launched
o To strengthen nutritional content, delivery, outreach, and outcome
o Merging the Supplementary Nutrition Programme and the Poshan Abhiyan
o Intensified strategy to be adopted to improve nutritional outcomes across 112 Aspirational
Districts
1.1.4 Universal Coverage of Water Supply

• Rs. 2,87,000 crore over 5 years for Jal Jeevan Mission (Urban) - to be launched with an aim to provide:
o 2.86 crore household tap connections
o Universal water supply in all 4,378 Urban Local Bodies
o Liquid waste management in 500 AMRUT cities
1.1.5 Swachch Bharat, Swasth Bharat

• Rs. 1,41,678 crore over 5 years for Urban Swachh Bharat Mission 2.0
• Main interventions under Swachh Bharat Mission (Urban) 2.0:
o Complete faecal sludge management and waste water treatment
o Source segregation of garbage
o Reduction in single-use plastic
o Reduction in air pollution by effectively managing waste from construction-and-demolition
activities
o Bio-remediation of all legacy dump sites
1.1.6 Clean Air

• Rs. 2,217 crore to tackle air pollution, for 42 urban centers with a million plus population.
1.1.7 Scrapping Policy

• Voluntary vehicle scrapping policy to phase out old and unfit vehicles.
• Fitness tests in automated fitness centres:
o After 20 years in case of personal vehicles
o After 15 years in case of commercial vehicles
1.2 Physical and Financial Capital and Infrastructure
1.2.1 Production Linked Incentive scheme (PLI)

• Rs. 1.97 lakh crore in next 5 years for PLI schemes in 13 Sectors
• To create and nurture manufacturing global champions for an AatmaNirbhar Bharat

• To help manufacturing companies become an integral part of global supply chains, possess core
competence and cutting-edge technology
• To bring scale and size in key sectors
• To provide jobs to the youth
1.2.2 Textiles
• Mega Investment Textiles Parks (MITRA) scheme, in addition to PLI:
o 7 Textile Parks to be established over 3 years
• Textile industry to become globally competitive, attract large investments and boost employment
generation & exports.
1.2.3 Infrastructure
• National Infrastructure Pipeline (NIP) expanded to 7,400 projects:
o Around 217 projects worth Rs. 1.10 lakh crore completed
• Measures in three thrust areas to increase funding for NIP:
o Creation of institutional structure
▪ Rs. 20,000 crore to set up and capitalise a Development Financial Institution(DFI) – to
act as a provider, enabler and catalyst for infrastructure financing
▪ Rs. 5 lakh crore lending portfolio to be created under the proposed DFI in 3 years
▪ Debt Financing by Foreign Portfolio Investors to be enabled by amending InvITs’ and
REITs’ legislations
o Big thrust on monetizing assets
▪ National Monetization Pipeline to be launched
▪ Important asset monetization measures:
a) 5 operational toll roads worth Rs. 5,000 crore being transferred to the
NHAIInvIT
b) Transmission assets worth Rs. 7,000 crore to be transferred to the PGCILInvIT
c) Dedicated Freight Corridor assets to be monetized by Railways, for operations
and maintenance, after commissioning
d) Next lot of Airports to be monetized for operations and management
concession
e) Other core infrastructure assets to be rolled out under the Asset Monetization
Programme:
o Oil and Gas Pipelines of GAIL, IOCL and HPCL
o AAI Airports in Tier II and III cities

o Other Railway Infrastructure Assets
o Warehousing Assets of CPSEs such as Central Warehousing Corporation
and NAFED
o Sports Stadiums
o Enhancing the share of capital expenditure
▪ Rs. 5.54 lakh crore capital expenditure in BE 2021-22 – sharp increase of 34.5% over Rs.
4.12 lakh crore allocated in BE 2020-21 :
a) Over Rs. 2 lakh crore to States and Autonomous Bodies for their Capital
Expenditure.
b) Over Rs. 44,000 crore for the Department of Economic Affairs to provide for
projects/programmes/departments exhibiting good progress on Capital
Expenditure
1.2.4 Roads and Highways Infrastructure

• Rs. 1,18,101 lakh crore, highest ever outlay, for Ministry of Road Transport and Highways – of which
Rs. 1,08,230 crore is for capital
• Under the Rs. 5.35 lakh crore Bharatmala Pariyojana, more than 13,000 km length of roads worth Rs.
3.3 lakh crore awarded for construction:
o 3,800 km have already been constructed
o Another 8,500 km to be awarded for construction by March 2022
o Additional 11,000 km of national highway corridors to be completed by March 2022
• Economic corridors being planned:
o Rs. 1.03 lakh crore outlay for 3,500 km of NHs in Tamil Nadu
o Rs. 65,000 crore investment for 1,100 km of NHs in Kerala
o Rs. 25,000 crore for 675 km of NHs in West Bengal
o Over Rs. 34,000 crore to be allocated for 1300 km of NHs to be undertaken in next 3 years in
Assam, in addition to Rs. 19,000 crore works of NHs currently in progress in the State
• Flagship Corridors/Expressways:
o Delhi-Mumbai Expressway – Remaining 260 km to be awarded before 31.3.2021
o Bengaluru-Chennai Expressway – 278 km to be initiated in the current FY; construction to
begin in 2021-22
o Kanpur-Lucknow Expressway – 63 km expressway providing an alternate route to NH 27 to be
initiated in 2021-22
o Delhi-Dehradun economic corridor – 210 km to be initiated in the current FY; construction to
begin in 2021-22

o Raipur-Vishakhapatnam – 464 km passing through Chhattisgarh, Odisha and North Andhra
Pradesh, to be awarded in the current year; construction to start in 2021-22
o Chennai-Salem corridor – 277 km expressway to be awarded and construction to start in 2021-
22
o Amritsar-Jamnagar – Construction to commence in 2021-22
o Delhi-Katra – Construction will commence in 2021-22
• Advanced Traffic management system in all new 4 and 6-lane highways:
o Speed radars
o Variable message signboards
o GPS enabled recovery vans will be installed
1.2.5 Railway Infrastructure

• Rs. 1,10,055 crore for Railways of which Rs. 1,07,100 crore is for capital expenditure
• National Rail Plan for India (2030): to create a “future ready” Railway system by 2030
• 100% electrification of Broad-Gauge routes to be completed by December, 2023
• Broad Gauge Route Kilometers (RKM) electrification to reach 46,000 RKM, i.e. 72% by end of 2021
• Western Dedicated Freight Corridor (DFC) and Eastern DFC to be commissioned by June 2022, to
bring down the logistic costs – enabling Make in India strategy
• Additional initiatives proposed:
o The Sonnagar-Gomoh Section (263.7 km) of Eastern DFC to be taken up in PPP mode in 2021-
22
o Future dedicated freight corridor projects –
▪ East Coast corridor from Kharagpur to Vijayawada
▪ East-West Corridor from Bhusaval to Kharagpur to Dankuni
▪ North-South corridor from Itarsi to Vijayawada
• Measures for passenger convenience and safety:
o Aesthetically designed Vista Dome LHB coach on tourist routes for better travel
o High density network and highly utilized network routes to have an indigenously developed
automatic train protection system, eliminating train collision due to human error.
1.2.6 Urban Infrastructure

• Raising the share of public transport in urban areas by expansion of metro rail network and
augmentation of city bus service
• Rs. 18,000 crore for a new scheme, to augment public bus transport:
o Innovative PPP models to run more than 20,000 buses

o To boost automobile sector, provide fillip to economic growth, create employment
opportunities for our youth
• A total of 702 km of conventional metro is operational and another 1,016 km of metro and RRTS is
under construction in 27 cities
• ‘MetroLite’ and ‘MetroNeo’ technologies to provide metro rail systems at much lesser cost with
similar experience in Tier-2 cities and peripheral areas of Tier-1 cities.
• Central counterpart funding to:
o Kochi Metro Railway Phase-II of 11.5 km at a cost of Rs. 1957.05 crore
o Chennai Metro Railway Phase –II of 118.9 km at a cost of Rs. 63,246 crore
o Bengaluru Metro Railway Project Phase 2A and 2B of 58.19 km at a cost of Rs. 14,788 crore
o Nagpur Metro Rail Project Phase-II and Nashik Metro at a cost of Rs. 5,976 crore and Rs. 2,092
crore respectively
1.2.7 Power Infrastructure

• 139 Giga Watts of installed capacity and 1.41 lakh circuit km of transmission lines added, and
additional 2.8 crore households connected in past 6 years
• Consumers to have alternatives to choose the Distribution Company for enhancing competitiveness
• Rs. 3,05,984 crore over 5 years for a revamped, reforms-based and result linked new power
distribution sector scheme
• A comprehensive National Hydrogen Energy Mission 2021-22 to be launched
1.2.8 Ports, Shipping, Waterways

• Rs. 2,000 crore worth 7 projects to be offered in PPP-mode in FY21-22 for operation of major ports
• Indian shipping companies to get Rs. 1624 crore worth subsidy support over 5 years in global tenders
of Ministries and CPSEs
• To double the recycling capacity of around 4.5 Million Light Displacement Tonne (LDT) by 2024; to
generate an additional 1.5 lakh jobs
1.2.9 Petroleum & Natural Gas

• Extention of Ujjwala Scheme to cover 1 crore more beneficiaries
• To add 100 more districts to the City Gas Distribution network in next 3 years
• A new gas pipeline project in J&K
• An independent Gas Transport System Operator to be set up for facilitation and coordination of
booking of common carrier capacity in all natural gas pipelines on a non-discriminatory open access
basis
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1.2.10 Financial Capital
• A single Securities Markets Code to be evolved
• Support for development of a world class Fin-Tech hub at the GIFT-IFSC
• A new permanent institutional framework to help in development of Bond market by purchasing
investment grade debt securities both in stressed and normal times
• Setting up a system of Regulated Gold Exchanges: SEBI to be notified as a regulator and Warehousing
Development and Regulatory Authority to be strengthened
• To develop an investor charter as a right of all financial investors
• Capital infusion of Rs. 1,000 crore to Solar Energy Corporation of India and Rs. 1,500 crore to Indian
Renewable Energy Development Agency
1.2.11 Increasing FDI in Insurance Sector

• To increase the permissible FDI limit from 49% to 74% and allow foreign ownership and control with
safeguards
1.2.12 Stressed Asset Resolution

• Asset Reconstruction Company Limited and Asset Management Company to be set up
1.2.13 Recapitalization of PSBs

• Rs. 20,000 crore in 2021-22 to further consolidate the financial capacity of PSBs
1.2.14 Deposit Insurance

• Amendments to the DICGC Act, 1961, to help depositors get an easy and time-bound access to their
deposits to the extent of the deposit insurance cover
• Minimum loan size eligible for debt recovery under the Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 proposed to be reduced from Rs.
50 lakh to Rs. 20 lakh for NBFCs with minimum asset size of Rs. 100 crore
1.2.15 Company Matters

• To decriminalize the Limited Liability Partnership (LLP) Act, 2008
• Easing Compliance requirement of Small companies by revising their definition under Companies
Act, 2013 by increasing their thresholds for Paid up capital from “not exceeding Rs. 50 Lakh” to “not
exceeding Rs. 2 Crore” and turnover from “not exceeding Rs. 2 Crore” to “not exceeding Rs. 20 Cr”.
• Promoting start-ups and innovators by incentivizing the incorporation of One Person Companies
(OPCs):
o Allowing their growth without any restrictions on paid up capital and turnover
o Allowing their conversion into any other type of company at any time
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o Reducing the residency limit for an Indian citizen to set up an OPC from 182 days to 120 days
and
o Allowing Non Resident Indians (NRIs) to incorporate OPCs in India.
• To ensure faster resolution of cases by:
o Strengthening NCLT framework
o Implementation of e-Courts system
o Introduction of alternate methods of debt resolution and special framework for MSMEs
• Launch of data analytics, artificial intelligence, machine learning driven MCA21 Version 3.0 in 2021-
22
1.2.16 Disinvestment and Strategic Sale

• Rs. 1,75,000 crore estimated receipts from disinvestment in BE 2020-21
• Strategic disinvestment of BPCL, Air India, Shipping Corporation of India, Container Corporation of
India, IDBI Bank, BEML, Pawan Hans, Neelachal Ispat Nigam limited etc. to be completed in 2021-22.
• Other than IDBI Bank, two Public Sector Banks and one General Insurance company to be privatized
• IPO of LIC in 2021-22
• New policy for Strategic Disinvestment approved; CPSEs except in four strategic areas to be privatized
• NITI Aayog to work out on the next list of CPSEs to be taken up for strategic disinvestment
• Incentivizing States for disinvestment of their Public Sector Companies, using central funds
• Special Purpose Vehicle in the form of a company to monetize idle land
• Introducing a revised mechanism for ensuring timely closure of sick or loss making CPSEs
1.2.17 Government Financial Reforms

• Treasury Single Account (TSA) System for Autonomous Bodies to be extended for universal
application
• Separate Administrative Structure to streamline the “Ease of Doing Business” for Cooperatives
1.3 Inclusive Development for Aspirational India
1.3.1 Agriculture
• Ensured MSP at minimum 1.5 times the cost of production across all commodities.
• With steady increase in the procurement, payment to farmers increased as under:
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• SWAMITVA Scheme to be extended to all States/UTs, 1.80 lakh property owners in 1,241 villages
have already been provided cards
• Agricultural credit target enhanced to Rs. 16.5 lakh crore in FY22 - animal husbandry, dairy, and
fisheries to be the focus areas
• Rural Infrastructure Development Fund to be enhanced to Rs. 40,000 crore from Rs. 30,000 crore
• To double the Micro Irrigation Fund to Rs. 10,000 crore
• ‘Operation Green Scheme’ to be extended to 22 perishable products, to boost value addition in
agriculture and allied products
• Around 1.68 crore farmers registered and Rs. 1.14 lakh crore of trade value carried out through e-
NAMs; 1,000 more mandis to be integrated with e-NAM to bring transparency and competitiveness.
• APMCs to get access to the Agriculture Infrastructure Funds for augmenting infrastructure facilities
1.3.2 Fisheries
• Investments to develop modern fishing harbours and fish landing centres – both marine and inland
• 5 major fishing harbours – Kochi, Chennai, Visakhapatnam, Paradip, and Petuaghat to be developed
as hubs of economic activity
• Multipurpose Seaweed Park in Tamil Nadu to promote seaweed cultivation
1.3.3 Migrant Workers and Labourers

• One Nation One Ration Card scheme for beneficiaries to claim rations anywhere in the country -
migrant workers to benefit the most
o Scheme implementation so far covered 86% of beneficiaries across 32 States and UTs
o Remaining 4 states to be integrated in next few months
• Portal to collect information on unorganized labour force, migrant workers especially, to help
formulate schemes for them
• Implementation of 4 labour codes underway
o Social security benefits for gig and platform workers too
o minimum wages and coverage under the Employees State Insurance Corporation applicable
for all categories of workers
o Women workers allowed in all categories, including night-shifts with adequate protection
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o Compliance burden on employers reduced with single registration and licensing, and online
returns
1.3.4 Financial Inclusion

• Under Stand Up India Scheme for SCs, STs and women,
o Margin money requirement reduced to 15%
o To also include loans for allied agricultural activities
• Rs. 15,700 crore budget allocation to MSME Sector, more than double of this year’s BE
1.4 Reinvigorating Human Capital
1.4.1 School Education

• 15,000 schools to be strengthened by implementing all NEP components. Shall act as exemplar
schools in their regions for mentoring others
• 100 new Sainik Schools to be set up in partnership with NGOs/private schools/states
1.4.2 Higher Education

• Legislation to be introduced to setup Higher Education Commission of India as an umbrella body with
4 separate vehicles for standard-setting, accreditation, regulation, and funding
• Creation of formal umbrella structure to cover all Govt. colleges, universities, research institutions in
a city for greater synergy.
o Glue grant to implement the same across 9 cities
• Central University to come up in Leh for accessibility of higher education in Ladakh
1.4.3 Scheduled Castes and Scheduled Tribes Welfare

• 750 Eklavya model residential schools in tribal areas:
o Unit cost of each school to be increased to Rs. 38 crore
o For hilly and difficult areas, to Rs. 48 crore
o Focus on creation of robust infrastructure facilities for tribal students
• Revamped Post Matric Scholarship Scheme for welfare of SCs
o Rs. 35,219 crore enhanced Central Assistance for 6 years till 2025- 2026
o 4 crore SC students to benefit
1.4.4 Skilling
• Proposed amendment to Apprenticeship Act to enhance opportunities for youth
• Rs. 3000 crore for realignment of existing National Apprenticeship Training Scheme (NATS) towards
post-education apprenticeship, training of graduates and diploma holders in Engineering
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• Initiatives for partnership with other countries in skilling to be taken forward, similar to partnership:
o With UAE to benchmark skill qualifications, assessment, certification, and deployment of
certified workforce
o With Japan for a collaborative Training Inter Training Programme (TITP) to transfer of skills,
technique and knowledge
1.5 Innovation and R&D

• Modalities of National Research Foundation announced in July 2019 –
o Rs. 50,000 crore outlay over 5 years
o To strengthen overall research ecosystem with focus on national-priority thrust areas
• Rs. 1,500 crore for proposed scheme to promote digital modes of payment
• National Language Translation Mission (NTLM) to make governance-and-policy related knowledge
available in major Indian languages
• PSLV-CS51 to be launched by New Space India Limited (NSIL) carrying Brazil’s Amazonia Satellite and
some Indian satellites
• As part of the Gaganyaan mission activities:
o 4 Indian astronauts being trained on Generic Space Flight aspects, in Russia
o First unmanned launch is slated for December 2021
• Rs. 4,000 crore over five years for Deep Ocean Mission survey exploration and conservation of deep
sea biodiversity
1.6 Minimum Government, Maximum Governance

• Measures being undertaken to bring reforms in Tribunals to ensure speedy justice
• National Commission for Allied Healthcare Professionals already introduced to ensure transparent
and efficient regulation of the 56 allied healthcare professions
• The National Nursing and Midwifery Commission Bill introduced for the same in nursing profession
• Proposed Conciliation Mechanism with mandate for quick resolution of contractual disputes with
CPSEs
• Rs. 3,768 crore allocated for first digital census in the history of India
• Rs. 300 crore grant to the Government of Goa for the diamond jubilee celebrations of the state’s
liberation from Portuguese
• Rs. 1,000 crore for the welfare of Tea workers especially women and their children in Assam and
West Bengal through a special scheme
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1.7 Tax Proposal
Vision of a transparent, efficient tax system to promote investments and employment in the country with
minimum burden on tax payers
1.7.1 Direct taxes
1.7.1.1 Achievements
• Corporate tax rate slashed to make it among the lowest in the world
• Burden of taxation on small taxpayers eased by increasing rebates
• Return filers almost doubled to 6.48 crore in 2020 from 3.31 crore in 2014
• Faceless Assessment and Faceless Appeal introduced
1.7.1.2 Relief to Senior Citizens

Exemption from filing tax returns for senior citizens over 75 years of age and having only pension and
interest income; tax to be deducted by paying bank
1.7.1.3 Reducing Disputes, Simplifying Settlement

• Time limit for re-opening cases reduced to 3 years from 6 years
• Serious tax evasion cases, with evidence of concealment of income of Rs. 50 lakh or more in a year, to
be re-opened only up to 10 years, with approval of the Principal Chief Commissioner
• Dispute Resolution Committee to be set up for taxpayers with taxable income up to Rs. 50 lakh and
disputed income up to Rs. 10 lakh
• National Faceless Income Tax Appellate Tribunal Centre to be established
• Over 1 lakh taxpayers opted to settle tax disputes of over Rs. 85,000 crore through Vivad Se Vishwas
Scheme until 30th January 2021
1.7.1.4 Relaxation to NRIs

Rules to be notified for removing hardships faced by NRIs regarding their foreign retirement accounts
1.7.1.5 Incentivising Digital Economy

Limit of turnover for tax audit increased to Rs. 10 crore from Rs. 5 crore for entities carrying out 95%
transactions digitally
1.7.1.6 Relief for Dividend

• Dividend payment to REIT/ InvIT exempt from TDS
• Advance tax liability on dividend income only after declaration/ payment of dividend
• Deduction of tax on dividend income at lower treaty rate for Foreign Portfolio Investors
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1.7.1.7 Attracting Foreign Investment for Infrastructure
• Infrastructure Debt Funds made eligible to raise funds by issuing Zero Coupon Bonds
• Relaxation of some conditions relating to prohibition on private funding, restriction on commercial
activities, and direct investment
1.7.1.8 Supporting ‘Housing for All’

• Additional deduction of interest, up to Rs. 1.5 lakh, for loan taken to buy an affordable house extended
for loans taken till March 2022
• Tax holiday for Affordable Housing projects extended till March 2022
• Tax exemption allowed for notified Affordable Rental Housing Projects
1.7.1.9 Tax incentives to IFSC in GIFT City

• Tax holiday for capital gains from incomes of aircraft leasing companies
• Tax exemptions for aircraft lease rentals paid to foreign lessors
• Tax incentive for relocating foreign funds in the IFSC
• Tax exemption to investment division of foreign banks located in IFSC
1.7.1.10 Ease of Filing Taxes

Details of capital gains from listed securities, dividend income, interest from banks, etc. to be pre-filled in
returns
1.7.1.11 Relief to Small Trusts

Exemption limit of annual receipt revised from ₹1 crore to ₹5 crore for small charitable trusts running
schools and hospitals
1.7.1.12 Labour Welfare

• Late deposit of employee’s contribution by the employer not to be allowed as deduction to the
employer
• Eligibility for tax holiday claim for start-ups extended by one more year
• Capital gains exemption for investment in start-ups extended till 31st March, 2022
1.7.2 Indirect Taxes
1.7.2.1 GST
Measures taken till date:
• Nil return through SMS

• Quarterly return and monthly payment for small taxpayers
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• Electronic invoice system
• Validated input tax statement
• Pre-filled editable GST return
• Staggering of returns filing o Enhancement of capacity of GSTN system
• Use of deep analytics and AI to identify tax evaders
1.7.2.2 Custom Duty Rationalization

• Twin objectives: Promoting domestic manufacturing and helping India get onto global value chain and
export better
• 80 outdated exemptions already eliminated
• Revised, distortion-free customs duty structure to be put in place from 1st October 2021 by reviewing
more than 400 old exemptions
• New customs duty exemptions to have validity up to the 31st March following two years from its issue
date
1.7.2.3 Electronic and Mobile Phone Industry

• Some exemptions on parts of chargers and sub-parts of mobiles withdrawn
• Duty on some parts of mobiles revised to 2.5% from ‘nil’ rate
1.7.2.4 Iron and Steel

• Customs duty reduced uniformly to 7.5% on semis, flat, and long products of non-alloy, alloy, and
stainless steels
• Duty on steel scrap exempted up to 31st March, 2022
• Anti-Dumping Duty (ADD) and Counter-Veiling Duty (CVD) revoked on certain steel products
• Duty on copper scrap reduced from 5% to 2.5%
1.7.2.5 Textiles
Basic Customs Duty (BCD) on caprolactam, nylon chips and nylon fiber & yarn reduced to 5%
1.7.2.6 Chemicals
• Calibrated customs duty rates on chemicals to encourage domestic value addition and to remove
inversions
• Duty on Naptha reduced to 2.5%
1.7.2.7 Gold and Silver

• Custom duty on gold and silver to be rationalized
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1.7.2.8 Renewable Energy
• Phased manufacturing plan for solar cells and solar panels to be notified
• Duty on solar invertors raised from 5% to 20%, and on solar lanterns from 5% to 15% to encourage
domestic production
1.7.2.9 Capital Equipment

• Tunnel boring machine to now attract a customs duty of 7.5%; and its parts a duty of 2.5%
• Duty on certain auto parts increased to general rate of 15%
1.7.2.10 MSME Products

• Duty on steel screws and plastic builder wares increased to 15%
• Prawn feed to attract customs duty of 15% from earlier rate of 5%
• Exemption on import of duty-free items rationalized to incentivize exporters of garments, leather, and
handicraft items
• Exemption on imports of certain kind of leathers withdrawn
• Customs duty on finished synthetic gem stones raised to encourage domestic processing
1.7.2.11 Agriculture Products

• Customs duty on cotton increased from nil to 10% and on raw silk and silk yarn from 10% to 15%.
• Withdrawal of end-use based concession on denatured ethyl alcohol
• Agriculture Infrastructure and Development Cess (AIDC) on a small number of items
1.7.2.12 Rationalization of Procedures and Easing of Compliance

• Turant Customs initiative, a Faceless, Paperless, and Contactless Customs measures
• New procedure for administration of Rules of Origin
1.8 Achievements and Milestones during the COVID-19 pandemic

• Pradhan Mantri Garib Kalyan Yojana (PMGKY)
o Valued at Rs. 2.76 lakh crore 19 o Free food grain to 80 crore people
o Free cooking gas for 8 crore families
o Direct cash to over 40 crore farmers, women, elderly, the poor and the needy
• AatmaNirbhar Bharat package (ANB 1.0)
o Estimated at Rs. 23 lakh crore – more than 10% of GDP
• PMGKY, three ANB packages (ANB 1.0, 2.0, and 3.0), and announcements made later were like 5
mini-budgets in themselves
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• Rs. 27.1 lakh crore worth of financial impact of all three ANB packages including RBI‟s measures –
amounting to more than 13% of GDP
• Structural reforms:
o One Nation One Ration Card
o Agriculture and Labour Reforms
o Redefinition of MSMEs
o Commercialisation of the Mineral Sector
o Privatisation of Public Sector Undertakings
o Production Linked Incentive Schemes
• Status of India’s fight against COVID-19
o 2 Made-in-India vaccines – medically safeguarding citizens of India and those of 100-plus
countries against COVID-19
o 2 or more new vaccines expected soon
o Lowest death rate per million and the lowest active cases
1.9 Vision for AatmaNirbhar Bharat

• AatmaNirbharta – not a new idea – ancient India was self-reliant and a business epicentre of the
world
• AtmaNirbhar Bharat – an expression of 130 crore Indians who have full confidence in their
capabilities and skills
• Strengthening the Sankalp of:
o Nation First
o Doubling Farmer’s Income
o Strong Infrastructure
o Healthy India
o Good Governance
o Opportunities for Youth
o Education for All
o Women Empowerment o Inclusive Development
• 13 promises made in the Union Budget 2015-16, and resonating with the vision of AatmaNirbharta,
to materialise during the AmrutMahotsav of 2022 – on the 75th year of our independence.
Major Structural Reforms Undertaken as a Part of Atmanirbhar Bharat Package
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1.10 Union Budget 2021-22: Analysis
1.10.1 Union Budget 2021-22: Analysing Key Numbers
1.10.1.1 Government receipts and expenditure

• Actual receipts (provisional figures) for April-December 2020 were only 50% of FY2020-21’s
budgetary estimates (BE). This number stood at about 55% for the previous financial year.
• However, the Centre’s expenditures in the two years were broadly similar as a proportion of the
budgeted amounts.
• It is clear that the ‘automatic stabilisers’ of public spending kicked in while the other three levers of
demand – consumption, expenditure, and net exports – remained muted.
• However, some may wonder whether the Centre could have done more during the peak of the
pandemic – only 75% of the budgetary allocations were spent in the crisis year, compared to 76%
during the previous financial year.
• As per the revised estimates (RE) however, total spending in FY2020-21 was raised by 13.4% over the
budgeted amount.
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1.10.1.2 Deficit numbers reach historical levels
• Since revenues were not expected to recover sharply (revised non-debt receipts were lower by
28.7%), budgetary deficits reached historically high levels.
• The Centre’s fiscal deficit stands at 9.5% of GDP (gross domestic product) as per FY2020-21 RE but is
estimated to decline to 6.8% during FY2021-22 (BE).
• However, these deficit figures reflect the fact that off-budget borrowings were finally recognised in
FY2020-21 RE after years of being hidden in various parts of the Budget.
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1.10.1.3 Revenue deficit remains high as a proportion of fiscal deficit
• Centre has been unable to meet the 0% revenue deficit target – a hallmark of sound public finance.
• Of late, revenue deficits have also remained stubbornly high as a proportion of fiscal deficit, implying
that most of the government’s borrowings are financing current expenditures.
• However, this ratio is estimated to decline to 75% in FY2021-22 (BE) from almost 80% in FY2020-21
(RE).
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1.10.1.4 Steep increase in subsidies as a percentage of total expenditure, stagnation in defence
• One of the biggest components of the Centre’s revenue expenditures – besides interest repayments
– is subsidies.
• Its share in government expenditure over nine major discretionary categories has doubled in FY2020-
21 (RE).
• This is on account of the belated admittance by the Centre of hidden food subsidy outlays, financed
mainly by coercing the Food Corporation of India (FCI) to borrow from National Small Savings Fund
(NSSF) and other agencies.
• The government has finally recognised these borrowings as part of public expenditure and hence,
there is a steep one-time increase in FY2020-21. In FY2021-22 BE, the outlay on subsidy is estimated
to drop sharply, although it is estimated to remain high relative to pre-pandemic levels.
1.10.1.5 Sharp uptick in capital expenditure

• This year’s Budget has been praised by some commentators for substantially increased spending on
capital expenditure. Capital expenditure has remained roughly stagnant for most of the past decade,
despite an initial increase in the first half of the NDA-II (National Democratic Alliance) regime (2019-
2024).
• However, this is all set to change with much higher allocations in FY2020-21 (RE) and FY2021-22 (BE).
The Budget suggests that capital expenditure will soon touch 2.5% of GDP – the highest figure in the
past decade.
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• If we ignore the temporary blip between 2014-15 and 2017-18, capital expenditure has remained
roughly constant at about 1.75% of GDP in the last decade. Similarly, its share in total government
spending too has stagnated at around 12%.
• FY2020-21 RE represent a sharp increase in capital expenditure, as a proportion of GDP, relative to
BE. This is not unexpected because nominal GDP fell by 4.2% in the year while overall government
expenditure remained the same. Thus, the share of total public spending in GDP also registered a
sharp increase in FY2020-21 and capital spending was no exception. If we look closely at capital
expenditure as a proportion of total expenditure, this figure is estimated to grow in FY2021-22 (BE) to
about 16% – a substantial figure given the historical trend.
• Most of the reporting on the Centre’s capital expenditure looks only at the outlay from the Union
Budget.
• However, Public Sector Undertakings (PSUs) also incur investment expenditure from their own
sources. The latter component is known as internal and extra budgetary resources (IEBR), and since
2014-15, it has replaced ‘GBS’ to capital expenditure from the Centre as the principal component of
the Centre’s public expenditure.
• A report of the Reserve Bank of India (RBI) argues that both of these must be considered together
to reach a fuller picture of the capital expenditure incurred by India’s public sector.
1.10.1.6 Agriculture in the 2021-22 Budget
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• Total spending on agriculture might have risen sharply in the last two years but most of this is on
account of higher (food) subsidies for repaying the FCI’s past debts.
o Year after year, a substantial part of the food subsidy was being put under the carpet by
increasing the Food Corporation of India’s (FCI) borrowings — these had crossed Rs 3 lakh
crore. No one believed that the budgeted figure of Rs 1,15,570 crore in the 2020-21 financial
year reflected the true picture of this subsidy. The FM has revised this figure to Rs 4,22,618
crore, a whopping increase of Rs 3,07,048 crore. The revised estimate (RE) for FY 2020-21 is
3.66 times the budgeted figure, indicating that almost all borrowings of FCI have been cleared.
This is indeed a historic step towards introducing transparency in the Union Budget. And for
FY 2021-22, the budgeted estimate is Rs 2,42,836 crore.
• Public investment as a share of total government expenditure in agriculture, has remained low since
the 1990s.
• The 2021-22 Budget does little to reverse this concerning trend – although the high allocations in
FY2020-21 (BE) gave room for optimism, a subsequent cutback in FY2020-21 (RE) and an insignificant
increase this year are disappointing.
• PM-KISAN (Pradhan Mantri Kisan Samman Nidhi) too has seen a reduction in outlay from Rs. 75,000
crore to Rs. 65,000 crore, reflecting the smaller number of farmers availing this scheme compared to
what was originally envisaged.
• Expenditure towards agricultural research and development (R&D) fell by 1% between 2019-20
(actuals as mentioned in 2021-22 Budget) and FY2020-21 (RE) – reflecting the shift in priorities post
Covid-19 – but is budgeted to grow by 9.7% in the coming year. Estimates suggest that the recently
revisited rate of return on agricultural R&D is quite substantial, which thus warrants a much steeper
hike in allocations.
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1.10.1.7 Disinvestment and taxation in the 2021-22 Budget
• Of late, proceeds from equity sales of PSUs have lagged behind BE. In FY2020-21, only 15% (Rs. 32,000
crore) of the budgeted Rs. 210,000 crore could be realised.
• However, the Centre remains ambitious in banking on non-debt capital receipts to finance its growing
expenditure burden.
• In the FY2021-22 BE, it is estimated to gather Rs. 175,000 crore from disinvestment – to anyone
underestimating the challenge, shows the steep climb required to close in on the target.
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1.10.1.8 Centre assumes buoyant tax revenues post-pandemic
• The Budget works with the assumption that revenues from corporation tax, income tax, and goods
and services tax (GST) will grow by over 22% in FY2021-22 over the RE of the previous budget.
• On the other hand, central excise revenues are expected to fall by 7% even as nominal GDP grows by
14.4%. This is a consequence of the new agricultural cess introduced in the Budget that will replace
and reduce central excise duties and customs on certain products and hence, sharply lowers the
revenues obtained from central excise, reflected in the negative buoyancy figures.
• The overall buoyancy of gross tax revenues for FY2021-22 is estimated to be only slightly higher than
historical averages computed by the Reserve Bank of India (2010-2019)
• However, last year, the Centre assumed a less optimistic 1.2 buoyancy figure, while for FY2021-22 it
is estimated to increase its forecast to 1.55.
• The implied buoyancy of 1.57 for corporation taxes in FY2021-22 might be difficult to attain with
2019’s steep reduction in rates.
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1.10.2 Union Budget 2021-22: Looking through a gender lens
• Gender budget stands at Rs. 153,326.28 crore for FY2021-22. Last year’s allocation was Rs.
143,461.72 crore (budget estimate) revised to Rs. 207,261.02 crore.
• As a proportion of total expenditure, the allocation (budget estimates) has fallen to 4.4%, from 4.7%
last year and 4.9% in the July 2019 budget.
• In a country that ranks 112th in the World Economic Forum’s Global Gender Gap Index (2020) and is
notorious for its low female labour force participation rates (FLFPR), it is bewildering that there was
almost no mention of women’s issues under ‘inclusive development for aspirational India’ and
‘reinvigorating human capital’ – two of the six pillars of this budget.
• Budget 2021-22 – the first digital budget of India – has given a strong push to digitisation.
• According to data from the 75th National Sample Survey (NSS) conducted in 2017-18, 12.8% of
females reported being able to operate a computer versus 20% of males, and 14.9% reported being
able to use the internet as compared to 25% of males. Seventy-one per cent of men in India own
mobile phones, while only 38% of women do. Anecdotally, we see that even if a household owns a
digital device and has internet connectivity, the male members are likely to have priority in using the
devices for work or study.
• From a budget perspective, a move such as giving out free/subsidised devices to women – potentially
linked to participation in public skilling programmes – could have an immediate positive impact.
• The massive boost in the budget to urban public transport is well-received. However, women face
particular challenges in accessing public transport, which restrict their physical and economic mobility.
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These new investments should be seen as opportunities to create gender-sensitive infrastructure
designs, especially last-mile connectivity.
• Under the Nirbhaya Fund (scheme for safety of women), there is an allocation of Rs. 10.4 crore versus
Rs. 855.23 crore budget estimate for FY2020-21. The revised estimate for FY2020-21 was slashed to
Rs. 8.53 crore, which might possibly be because this scheme is for women’s safety in the public space
and 2020 was about staying in for most of us. However, we see no compensatory focus on funding
interventions to address domestic abuse – termed as the ‘shadow pandemic’ by UN Women – such
as shelter homes and legal aid. The “women helpline” and “one stop centre” line items in the gender
budget, both show reduced figures under revised estimates for FY2020-21, and these are, in fact,
empty for FY2021-22. For FY2019-20 – the latest year for which actual spend figures are available
under the gender budget – the actual spend for the Nirbhaya Fund is Rs. 11.38 crore versus an
allocation (budget estimate) of Rs. 891.23 crore.
• The health sector focus could have been a chance to underscore its role in job creation for women
but the only announcement that could potentially impact women workers in the sector was the
introduction of the National Nursing and Midwifery Commission Bill, to promote transparency,
efficiency and governance reforms in the nursing profession.
• An announcement in the budget increasing the currently pitifully low minimum wage for ASHA,
anganwadi and ANM (auxiliary nurse midwife) workers would have been an excellent and much-
needed tribute to the sterling role played by frontline health workers, who worked long hours, under
hazardous and arduous conditions, risking personal attacks due to the stigma associated with COVID-
19. (Note: No such announcement was made. This is a negative point regarding budget. Such an
announcement should’ve been there.)
• A major thrust of the budget is the textile industry. There are plans to launch a scheme of Mega
Investment Textiles Parks (MITRA) to enable the industry to become globally competitive, attract
large investments, and boost employment generation. This is in addition to the ‘Production-linked
Incentive’ Scheme, which was earlier announced for 10 key sectors, including textile. There has also
been rationalisation of duties on raw material inputs for the sector. To ensure that expansion of the
sector translates into greater employment for women, enabling conditions should be created such as
provision of targetted skilling and apprenticeship, reliable childcare facilities, safety at the workplace
and commute to work, fair pay, parental leave, flexible hours, and so on. A positive move in this
regard is the labour code provision of women being entitled to all kinds of work, including in night
shifts with “adequate protection”.
• In terms of women’s well-being, time use, and participation in paid work outside the home, anything
that improves the provision of public services, eases the burden of domestic work, which tends to be
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disproportionately borne by women. Hence, the spotlight on universal water supply under the Jal
Jeevan Mission is welcome.
• This budget prioritises the issue of air pollution in urban areas but does not highlight the problem
of indoor air pollution – caused by use of unclean fuel for cooking, which has a greater negative impact
on the women of the household. It is well-known that the Ujjwala scheme has expanded the coverage
of LPG (liquefied petroleum gas) in rural India but the usage of LPG by households remains limited.
• Finally, under Swachh Bharat, Swasth Bharat (clean India, healthy India), the focus is mainly on proper
waste management and clean air in urban centres – two significant matters – but excluded aspects
like public toilets that are important for women venturing out of their homes.
• The allocation for the vaccination drive announced as part of the budget seems generous. If this is
rolled-out efficiently and the pandemic is controlled over the next few months, it can have an
immediate positive impact on services such as hospitality and beauty as these tend to have high
person-to-person contact. Such services have emerged as vital avenues for women’s economic
participation in recent years, particularly in cities.
1.10.3 Union Budget 2021-22: How to Increase Income Tax Collection?

• Budget estimates for 2021-22 show that only a little over half of the receipts of the central
government will come from taxes; 47% comes from non-tax revenues, non-debt capital receipts, and
borrowings and other liabilities. There is a clear need to raise the tax collection in India.
• As per the budget estimates for 2021-22, only 14% of the receipts (and 26% of the tax receipts) are
constituted by income tax. There is, of course, a need to check tax evasion.
• High Individual Threshold: The threshold for exemption from payment of any income tax, Rs. 5 lakh,
is over 3.5 times the national per capita income, and higher than most countries. (Business Standard
2021). Unlike most previous years, there has been no further increase to this threshold in the budget,
and this is a positive development.
• High threshold for a family: This threshold is at the individual level, and the same is applicable to other
adult members in the family who have incomes. So, if there are two adults in a family, the total
potential exemption is Rs. 10 lakh annually. The story does not end here. If a family files taxes not
just in individual names but also in the name of ‘Hindu Undivided Family’, then there is an additional
Rs. 2.5 lakh exemption per year.
• Should Multiple Exemption be Offered? There are many exemptions under income tax laws. Let us
consider one example in detail. There is a tax benefit if an investment of up to Rs. 1.5 lakh is made in
Equity Linked Savings Scheme (ELSS) – an equity mutual fund with a lock-in period of three years. The
ELSS exemption was conceived at a time when the stock market and mutual funds were not very
popular, but the provision has remained. Currently, the Bombay Stock Exchange Sensex is performing
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rather well. So, it is not clear if such an incentive is needed now – assuming there was some valid
rationale in the past, which too is doubtful.
• There are two more longstanding provisions under the income tax law:(i) exemption for premium paid
on medical insurance policy of up to Rs. 25,000 per assessee, (ii) interest income from savings
accounts in banks is exempt up to Rs. 10,000 for each assessee.
• It is interesting that when people (including many economists) think of tax exemptions, they tend to
think of exemption for agricultural income. In fact, that is hardly an effective exemption, given low
agricultural incomes and high threshold before income tax becomes applicable anyway. That
exemption can be removed without much difficulty – alongside the removal of many other exemptions
outside of agriculture.
• There are some issues here. First, while it is possibly true that each of the above exemptions do not
cost the central government too much, the total impact of all the different exemptions can be
significant. Secondly, the exemptions are availed primarily by the more-aware segments in the
population, and those who are able and willing to find and pay a good tax advisor. So, it is not an
egalitarian policy. Third, though there may be some similar provisions for exemptions in developed
countries too, the number of exemptions is not so high.
• It is important to reduce – if not remove – the various income tax exemptions in a phased manner,
and alongside deal with the difficulties people face in a well-targetted way through other appropriate
policies.
• A policy suggestion on income tax threshold:
o Given that the income threshold for tax is very high relative to the national per capita
income, there is a need to reduce this substantially. This will increase income tax collection.
o There is a need to increase tax collection in India – gradually and carefully, but in a sustained
manner. An important way is to check evasion of all taxes. However, it is also important to
ensure that the law requires people to pay taxes in the first place, this is particularly true of
income tax on the one hand, and wealth and inheritance tax on the other – though the
segments that need to be ‘targetted’ are very different in the two cases
o Furthermore, given the imposition of a tax, there is a need to move in a phased manner to
keep exemptions to the minimum, and at the same time, use other suitable policy measures
to provide much-needed relief to people in different spheres of their lives.
1.10.4 Union Budget 2021-22: Is Infra Spending a Panacea for all Ills?
• The 2021-22 Union Budget, announced on 1 February 2021, made a definitive turn to the right as it
turned its back on providing any direct fiscal stimulus. Instead, it focussed heavily on investment in
infrastructure to bring the Indian economy out of the current recession.
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• There is no doubt that high-quality public infrastructure supports economic growth, generates jobs,
and improves the well-being of the citizens. The budget proposes investment in national highway
projects, especially for the four poll-bound states (namely, Assam, Kerala, Tamil Nadu, and West
Bengal), road transport, and power distribution, among others.
• Can infra spending give an immediate boost? Yet, infrastructure investment is complex, and getting
from conception to construction and operation, is a long road fraught with obstacles and pitfalls.
Poor governance is a major reason why infrastructure projects often fail to meet their timeframe,
budget, and service delivery objectives, and often get stalled. As such, it is argued that the strong
‘multiplier effect’ of infrastructure spending can be realised, only if it is delivered in a timely manner
and is effectively targetted.
• Meeting these criteria may, however, be a challenge, especially during a recession triggered by the
pandemic. Infrastructure construction projects take a few quarters to a few years to even get off the
ground due to implementation lags in planning and permissions, including environmental permits,
and issues of land acquisition. This means that the boost to infrastructure investment may not be
well-timed and may actually amplify, rather than smoothen, economic cycles.
• Infra spending does not provide support to those most affected by Covid-19 pandemic directly:
Targetting such spending effectively may also be problematic. In order to stimulate the economy,
money needs to get into the hands of the most vulnerable people who would spend it quickly to
multiply its impact. It is however difficult to achieve this by investing in infrastructure that typically
targets the heavy construction industry, which may not be particularly hard hit in a recession.
However, sectors that have been most adversely impacted by the pandemic, such as exports and
tourism, including many micro, small and medium sized firms (MSMEs), are not easily reached
through this stimulus.
• Infra spending is highly localised: Furthermore, investment in infrastructure is highly localised – there
is no reason to expect that the regional distribution of infrastructure needs will necessarily coincide
with the geographic distribution of its impact.
• Besides, the actual budget allocation towards infrastructure is rather modest: it is around Rs. 1.77
lakh crore of the additional economic stimulus for 2021-22, which is just 0.8% of GDP. This extra
spending will be divided amongst projects to build highways and roads, to provide safe drinking water
under the Jal Jeevan Mission, to build a new development finance institution called National Bank for
Financing Infrastructure and Development (NaBFID), and also to offer credit to MSMEs. More
specifically, a comparison of the budgetary allocation to the Ministry of Highways and Road Transport
in 2020-21 (Rs. 91,823 crore) and 2021-22 (Rs. 118,101 crore) indicates an impressive growth rate of
28.6% - although the budgeted spending on highways and road transport is still only about 3.4% of
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total budgeted expenditure of Rs. 34,83,236 crore in 2021-22. Insufficient funding for capital
expenditure may stall projects especially if they run over time and may, ultimately, fail to boost
income or employment to the levels required to pull the economy out of the recession.
• Premature Infra Spending can result in NPAs: Even in pre-Covid economic slowdown, premature
infrastructure projects were an important factor for the growth of non-performing assets (NPAs) on
the banks' balance sheets. If a road is built in anticipation of a new industrial sector that will use the
road and pay the user fee, but the industry takes too long to materialise, the firm that built the road
under a public-private partnership goes belly-up, creating a NPA in a bank that issued the loan.
• Conclusion: 2021-22 Budget has gone for a strong infrastructure push (albeit still modest shares of
infrastructure spending in total expenditure and GDP), accompanied by a cut in the education budget
and insufficient investment in health The sprawling construction sites that public infrastructure
spending creates are visible reminders to voters that the government is working to address a crisis –
in line with the “New Welfarism” of the Modi government – in a year when four states go to polls.
Leaving aside this political dividend, the expected contribution of infrastructure investment to pull the
economy out of this deep recession crucially depends on whether it can generate timely, well-
targetted, and inclusive growth. While the budget has made the stock market happy – largely because
there has been no new tax or increase in existing tax that many feared – serious doubts remain about
its adequacy to steer a ‘V-shaped recovery’ as claimed by the government.
1.10.5 Union Budget 2021-22: Insufficient allocation to Health and Education Sector
• This budget has failed to prioritise investment in less risky and more labour-intensive, traditional
public goods such as basic health and education – as governments around the world have done to
tackle recession currently and historically.
• Hype of 137% increase in health spending: There has been considerable hype about the 137%
increase in healthcare spending in 2021. However, in reality, these increased healthcare allocations
are arrived at by adding the following budget heads: Health Ministry, AYUSH (Ayurveda, Yoga and
Naturopathy, Unani, Siddha and Homoeopathy) Ministry, Department of Drinking Water and
Sanitation; allocations by the Finance Commission for health, water and sanitation, and a new head
of money for Covid-19 vaccination. For 2021-22, India's Health Ministry has been allotted Rs.
73,931.77 crore. This is up 10.16% from the budget estimate for 2020-21. A 10% increase in health
allocations this year – in a country that has always been underspending on health – does not seem
sufficient. Moreover, the amount allocated towards Covid-19 vaccination accounts for only 9% of the
extra spending intended to tackle a recession that has been caused by the pandemic.
• Education allocation slashed: The role of investment in education in a recession is difficult to ignore
as it can directly contribute to more productivity, efficiency, and hence higher earnings, and less
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vulnerability to unemployment. Hence, a government with an ambitious investment and growth
programme is expected to invest significantly in education and skills training. Contrary to everyone’s
expectations, however, the 2021-22 Budget has slashed education allocation by about 6%.While the
Education Ministry rationalised the cut on account of Covid-19 exigencies, the sharp dip in the
education budget highlights the utter negligence of the sector at a time when schools and universities
– that have remained shut for over 10 months – are in desperate need of a special package to get back
on track.
• Digital Divide unaddressed: While the government of India quickly recommended schools to move to
online teaching, it was easier said than done. India has an immense digital divide, with embedded
gender and class divides: only 42% (14.9%) of urban (rural) households have access to internet, where
males are the primary users. Most teachers are ill-equipped for online teaching too. Technology has
the potential to achieve universal and high-quality education and improve learning outcomes. But in
order to unleash its potential, digital capabilities, the required infrastructure, and connectivity must
reach the remotest and poorest communities. Unfortunately, the 2021-22 Budget on education has
not addressed this.
1.10.6 Union Budget 2021-22: Is it sufficiently pro-poor?

• Need for pro-poor tilt: The Indian economy has suffered more than most others with gross domestic
product (GDP) plummeting by 7.7% during the last financial year. What is worse is that it is the bottom
third of the population that has suffered the most. So, it was crucial for the Finance Minister and her
team to formulate a budget that would enable the economy to stage a quick recovery while ensuring
that the overall growth process exhibits a pronounced pro-poor tilt.
• Difficulty in being pro-poor: This was no easy task because the virtual collapse of economic activity
during the past year has left government coffers empty, with both tax and non-tax revenues being
significantly lower than the budget estimates.
• How does the Budget fare in terms of these criteria? While there are several positive features in the
Budget, the overall thrust is disappointing because it does not address the needs of the poor.
• Job Creation: The government may be hoping that since road construction and other infrastructure
projects are relatively labour-intensive, the pattern of new investments will have a significant impact
on employment. Perhaps, the government also has faith that the proposed Mega Textiles Parks will
contribute to job creation since the textiles industry too is quite labour intensive. However, the Budget
does not contain any specific proposals or schemes that are designed to boost employment. In fact,
the budgetary allocation for MNREGA itself is almost 30% lower than the revised estimates for 2020-
21. Note, however, that there was a steep increase in the allocation to MNREGA during the past
financial year in order to provide employment to migrants after they returned from urban areas.
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o There was no clear statement in the budget on boosting employment, especially female
employment, which has been falling over the last several years.
o Infrastructure spending (which, not unsurprisingly, was targeted towards poll-bound states)
might boost employment to a certain extent, but it is not clear that the increased outlay is
sufficient to meet the massive employment challenge.
o Medium, small and micro enterprises (MSMEs) employ a very large part of the non-agrarian
workforce. These enterprises, several already precarious, have been struggling to survive
during the economic recession. The budget would have been the right forum to announce big-
bang support and revival policies for this sector.
• Explicitly pro-poor measures that could have been taken: The allocation for MNREGA could have
been kept at a level closer to the revised estimates for 2020-21. Some version of an urban MNREGA
could have been started – even if as a ‘pilot’ project. The government could also, at least for a limited
period, distribute a larger amount of foodgrains more widely from the overflowing warehouses of the
Food Corporation of India (FCI). The buffer stock is so far in excess of any reasonable levels that a
sizeable fraction will rot or be eaten by rats. Additionally, direct transfers of small amounts of cash to
targetted sections of the population would have been a wonderful step.
1.10.7 Union Budget 2021-22: Are we shifting away from welfarism?

• Budget furthers an important political shift in the economic narrative of the NDA government.
• Prime Minister Narendra Modi’s first term in office was marked by a ‘welfarist’ orientation – visible in
the plethora of schemes for sanitation, housing, gas cylinders, and so on. Without debating the
effectiveness of these schemes, there is no doubt they played an important role in the 2019 elections,
and were emblematic of the central government’s approach.
• Since the start of the pandemic, this welfarist-focussed politics has taken a backseat. The
government’s stubborn refusal to loosen its purse strings and provide direct fiscal support – and
instead rely on monetary policy levers – is evidence of this shift. Rather than expanding, government
expenditure contracted, picking up only in November 2020.
• Importantly, the increased total expenditure in FY2020-21 (from Rs. 30.4 lakh crore BE to Rs. 34.5 lakh
crore RE) includes Rs. 1.5 lakh crore of prepayment of past dues to the Food Corporation of India. The
emphasis on physical infrastructure over continued expansion of the food subsidy and MNREGA
(Mahatma Gandhi National Rural Employment Guarantee Act)7 (the two pillars of the Covid-19 relief
measures) in the FY2021-22 budget, and the absence of any direct support to migrant workers and
the urban poor, points to a decided shift away from the welfarism of the past.
• A new political economy approach is now being crafted. India’s poor will disproportionately bear the
costs of this shift away from expanded welfare support toward physical infrastructure.
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• The gains from increased investments in physical infrastructure will not immediately translate into
employment and increased wages for the poor. There are continuing governance challenges, which
despite announcements of a ‘bad bank’ and Development Finance Institution (DFI), will not be
addressed overnight.
• India’s post-lockdown economic recovery is showing signs ofs deepening structural inequality.
Economic activity has reached near pre-pandemic levels but this is largely profit-led. Large, listed firms
have profited at the cost of small firms and the informal sector. The scars in the labour market,
particularly informal labour, run deep. The shifting political economy underlying the policy choices
made at the peak of pandemic and in its aftermath in the 2021-22 Budget, suggest that these scars
will likely deepen in the years to come.
1.10.8 Union Budget 2021-22: The Good and the Bad

There are some positives in the Budget.
• For instance, there has been a conscious effort to avoid fudging of data – no mean feat in India. The
usual practice so far was to hide the size of the food subsidy bill by passing it off as FCI market
borrowings. This practice has been shelved and the FCI will have to be funded transparently from
now on.
• The government has also taken another big step forward by clearing off the arrears of the fertiliser
industry.
• The Budget speech has also been remarkably brave by announcing plans that go against what is
generally considered politically acceptable. The government has said that it will raise the foreign
direct investment (FDI) limit in insurance to 74%. It also plans to reduce its holding in the Life
Insurance Corporation (LIC) and sell two public sector banks. The Finance Minister even went so far
as to use the word “privatisation” in this connection! Of course, we will have to wait and see the
degree to which these plans can be successfully implemented. But the intention has been clearly spelt
out.
• Not surprisingly, a large sum of Rs 35,000 crores has been allocated to the Covid-19 vaccination drive.
• Water and sanitation have also been given additional outlays.
• The Finance Minister has announced a new centrally sponsored initiative to develop capacities of
primary, tertiary, and secondary healthcare systems to detect and cure new diseases.
However, a regressive step in this Budget is the neglect of the education sector – there has actually been
a 6% reduction in the allocation to the Education Ministry. This government has repeatedly emphasised
its desire to build a knowledge economy, and to strengthen universities and research institutions to
compete with the best in the world. Surely, this is not the right way to achieve these goals.
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Among the more disappointing features of the Budget is the strengthening of protectionist tendencies.
The Budget seeks to remove exemptions on a number of items and increase rates on a few others. It is
rather ironic that the current government is turning the clock back to bring in policies that were in vogue
during the Nehru years. At any rate, the encouragement of domestic industries behind high tariff walls is
myopic beyond belief. It does not promote self-reliance, but only high-cost industries that cannot
compete in global markets. In some cases, an increase in tariffs on intermediates does not even benefit
domestic intermediate producers simply because there are none. This seems to be the case for some
components used in the manufacture of mobile phones.
1.10.9 Union Budget 2021-22: Does it Address Structural Issues?

Although this Budget was presented in an exceptionally difficult period for the Indian economy,
policymakers remained cognisant of the structural challenges facing the country.
Increasing the share of capital expenditure will create long-term assets and boost growth over the
medium term. Capital spending that is slated to go up by 26 per cent to Rs 5.54 lakh crore over the current
fiscal year’s revised estimate of Rs 4.39 lakh crore, which is 6.6 per cent higher than the original provision.
Transparent fiscal reporting – brought about by phasing out extra-budgetary borrowings almost entirely
– will restore credibility to India’s deficit numbers.
What makes the Budget particularly bold are the proposals to increase the FDI limit in the insurance
sector from the existing 49 per cent to 74 per cent and targeting of the privatisation of at least two state-
owned banks and one general insurance company in 2021-22. This, when the ruling party is already facing
a challenge from the opposition to its farm reform laws. Pushing through the required amendments to
the existing bank and insurance nationalisation acts may not be difficult in Parliament. But, as with the
farm laws, the real test will lie in how the government deals with the strong employee unions in these
two sectors.
Challenges in meeting targets for tax collection and disinvestment proceeds might be significant but in
the absence of a second wave of Covid-19 cases, cheer may return to the Revenue Department.
However, agricultural investment – especially R&D – deserves greater emphasis. The sector’s struggles
over the years can be neatly mapped onto the declining share of capital formation and rising proportion
of subsidies in the Centre’s total outlay on agriculture. Now that the Centre has come clean on food and
fertiliser subsidy, one can hope that investment in agriculture will be increased in the coming years.
Budget has proposed a new bad bank framework to deal with the problem of non-performing assets. It
is not clear how such an entity — whether an asset reconstruction or management company — would
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operate. How will it be financed? At what price, and when will the bad loans of banks be transferred to
it? How will the process be made transparent and shielded from the 3Cs?
Government also announced the setting up of a development finance institution to provide long-term
financing for infrastructure projects. While, in theory, this makes sense — there are asset-liability
mismatch issues when it comes to banks undertaking project financing — the experience with creating
such institutions in the recent past, be it IDFC (which eventually became a bank) or IIFCL (India
Infrastructure Finance Company Limited), is not very inspiring.
Lastly, while it is good to account fully for food and fertiliser subsidies on the government’s books, how
long can their overdue rationalisation wait? The issue prices of subsidised food grains have not been
raised for over two decades, and of urea not since April 2010. The Budget has no roadmap on capping
the existing minimum support price-based grain procurement — which is, of course, too much to expect
in the current circumstances. But this is a reform that cannot be put off indefinitely and it must be hoped
that it is still on the government’s radar. The Budget has also continued with the trend of the last few
years of raising import duties on items such as mobile phone and auto parts to promote domestic
manufacturing. Such proposals dent its reformist intentions.
This is being termed as a growth Budget more than a revivalist one. This shows that the Finance Minister
still has an eye on the ‘US$5 trillion GDP by 2024-25’ goal – the coming year may tell us more about how
realistic that is.
1.10.10 Union Budget 2021-22: An unfinished agenda on jobs and skills

• COVID reminded us that our social security systems need reform and we must tackle EPFO and ESI.
• Decriminalisation of laws and rules was mentioned but we need a 180-day compliance commission
to rationalise, decriminalise and digitise our thousands of compliances and filings.
• We must notify reasonable rules for our four labour codes while simultaneously setting a deadline to
move to one labour code.
• Divestment of two nationalised banks is a great start but truly accelerating the financial inclusion that
explodes small firm job creation needs an independent holding company for the remaining state-
owned banks.
• The creation of the new higher education commission needs acceleration — notwithstanding the
atmanirbhar announcement of online education deregulation, only seven of India’s 1,000
universities have been licenced for online degree delivery (even though 200-plus foreign universities
operate in India online).
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• The proposed amendment to the Apprentices Act is welcome and must create space for skill
universities. Degree apprentices are the future of massifying higher education because they innovate
at the intersection of financing, employability, and signalling value.
1.10.11 Union Budget 2021-22: A need to correct subsidy bias in Agriculture?

• Finance Minister Nirmala Sitharaman needs to be complimented for bringing about transparency in
the Union Budget, at least in the part on the agri-food sector.
• Subsidy for agriculture sector:
o Food subsidy: For FY 2021-22, the budgeted estimate is Rs 2,42,836 crore.
o Fertiliser Subsidy: For FY 2021-22, things are likely to smoothen with a budget provision of
Rs 79,530 crore.
o PM-Kisan: Rs 65,000 crore is now budgeted for FY 2021-22.
o The Pradhan Mantri Fasal Bima Yojana is budgeted at Rs 16,000 crore for FY 2021-22 , not
much different from the RE of FY 2020-21
o The interest subsidy on short-term credit to farmers in FY 2021-22, Rs 19,468 crore, too
will not be very different from the RE of FY 2020-21.
• From a policy perspective in the agri-food space, beyond the transparency in numbers, one must point
to the huge bias towards subsidies — food and fertiliser, PM-Kisan, crop insurance and interest
subvention — as compared to investments, especially research and development.
• The allocation for agri-R&D is a meagre Rs 8,514 crore in FY 2021-22 against a RE of Rs 7,762 crore in
FY 2020-21. This is bewildering as the marginal returns in terms of agri-growth from expenditures on
agri-R&D are almost five to 10 times higher than through subsidies. India spends not even half of
what a private global company like Bayer spends on agri-R&D — almost Rs 20,000 crore every year.
No wonder our growth momentum in agriculture remains subdued and India keeps spending on
freebies with sub-optimal results.
o Investment in human capital, science and research remains the Achilles heel of Indian
policy. The budget allocation for agriculture research and education has constantly
declined from 0.31 per cent of the gross value added of agriculture and allied activities in
2011-12 to 0.24 per cent now. To realise India’s growth story and for us to be in the big
league with the developed nations we need to match their R&E allocations of 2.5 per cent.
• Food Subsidy: Points to ponder
o One with respect to food subsidy, the FCI’s economic cost of rice is Rs 37/kg and of wheat
about Rs 27/kg. This economic cost is roughly 40 per cent higher than the procurement
price. Why not give the public distribution system’s beneficiaries the choice of direct cash
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transfers to the tune of procurement price plus 25 per cent? This could create a more
diversified demand which, in turn, will support diversification in agriculture.
o Further, in food subsidy, it is time to revise the issue prices for beneficiaries. While the
“antyodaya” (most marginal) category can keep receiving grains at Rs 2 or Rs 3/kg, all
others should pay at least half of the procurement price if food subsidy has to be brought
to manageable levels.
o Further, one should debate whether 60 or 67 per cent of the population should be covered
by the food subsidy or this figure should be brought down to 40 per cent.
• Fertiliser Subsidy needs Reform: in the case of the fertiliser subsidy again, massive subsidisation of
urea, to the tune of almost 70 per cent of its cost, is leading to its sub-optimal usage. It is time to move
towards direct cash transfers to farmers based on a per hectare basis and free up prices of fertilisers.
This will help reduce leakages and imbalance in NPK (nitrogen, phosphorus, potassium) usage and lead
to efficiency, equity and environmental sustainability.
• Agri-Insurance Reforms:
o The agriculture insurance pipeline that drains precious government resources in the name
of the farmer should have been turned off. For example, the government owned
Agriculture Insurance Company of India has incurred losses of Rs 10,000-crore, while the
private insurance sector raked in profits of approximately Rs 50,000 crore.
o Many states have stopped participating in the programme — Bihar, West Bengal and
Jharkhand have stopped, while Maharashtra and Madhya Pradesh are also about to dump
the scheme.
• R&D Expenditure needs to increase: Overall, the expenditure on agri-R&D needs to be doubled or
even tripled in next three years, if growth in agriculture has to provide food security at a national level
and subsidies on food and fertilisers need to be contained. Can our policymakers do it? Only time will
tell.
Note: It was heartening to hear the government validating its commitment to MSP procurement, which
has expanded across regions and more farmers are benefitting. Allowing the APMCs to tap into the
Agriculture Infrastructure Fund is also commendable as the money borrowed to develop mandis will
now be eligible for interest subvention. Extending the Operation Green scheme to all perishables is
noteworthy and so is starting the Kisan Rail.
1.10.12 Union Budget 2021-22: Does budget fulfill needs of an ailing economy?
• India – An ailing economy:
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o Indian economy was battered by two years of slowdown, with a pre-pandemic annual growth
rate of 4 per cent being a decadal low and the subsequent collapse in economic activity due to
the pandemic which is expected to reduce the GDP by 7.7 per cent.
o With all-round distress due to declining wages, job losses and decreasing economic activity,
which has affected the majority of the informal working class, this budget was expected to
provide a robust path for recovery.
• There is no need to heap praise on government for being transparent with fiscal deficit numbers:
The government has earned kudos for being transparent on including the off-budget items. This
should have been a normal practice. But when virtue is in short supply, even small steps of
transparency matter.
• Total expenditure of the government in 2020-21 hardly increased compared to the pre-pandemic
budget estimates (BE). The total increase in revised estimates (RE) for 2020-21 is only Rs 33,000 crore,
around 1 per cent more than what was budgeted.
o Of course, the natural question to ask is what happened to the mid-year announcements which
the prime minister called mini budgets as part of pandemic relief in March 2020 — Rs 20 lakh
crore in May 2020 and similar announcements later on.
o The government did deliver by raising the expenditure on food subsidy, direct benefit
transfer to Jan Dhan accounts (Rs 33,000 crore) and the increase in the Mahatma Gandhi
National Rural Employment Guarantee (MGNREGA) (Rs 50,000 crore) and so on. But it did so
not by generating resources and expanding the fiscal deficit but by cutting down essential
expenditure such as agriculture (Rs 18,000 crore), education (Rs 14,000 crore) and social
welfare (Rs 14,000 crore). Whether even these revised estimates will remain the same as
actual expenditure will only be known in the next budget.
• Delusions of grandeur are also seen in the case of the mega announcement of increase in the health
budget to Rs 2.23 lakh crore. This number was achieved by adding one-time expenditures on the
vaccine, Finance Commission grants and inclusion of expenditure on drinking water, sanitation and
nutrition. The reality is that the budget of the health ministry for 2021-21 is lower at Rs 74,602 crore
compared to the revised estimates of Rs 82,445 crore for the current year.
• It is the same case with agriculture where grand claims on farmers covered and amount spent on MSP
purchases were announced. Like in many other essential ministries, the agriculture ministry also
witnessed a cut with estimates of 2021-22 lower by Rs 11,000 crore than last year. No wonder,
farmers have little trust in the government’s claim of reforms when it refuses to spend even the bare
minimum that it promised. Real investment in agriculture has been lower than 2013-14 for every
year of this government.
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• At a time when real wages in rural areas have declined not just compared to last year but also
compared to five years ago and farm gate prices have crashed for most agricultural commodities,
even the lifeline provided by expenditure in rural areas on infrastructure creation and employment
generation has either seen a decline in budgeted expenditure or remained stagnant.
o The budget for the ministry of rural development is lower by Rs 66,000 crore compared to
the RE of last year.
o MGNREGA budget of Rs 73,000 crore is barely enough to cover the increase in wages by 11
per cent announced in March 2020. It is only 1.8 per cent higher than the actual expenditure
of 2019-20, but 52 per cent lower than the RE of last year.
o Pradhan Mantri Gram Sadak Yojna (PMGSY), the budget for 2021-22 has been cut by Rs 4,500
crore, not even enough to cover inflation between the two years.
• Unlike the pandemic, where the arrival of vaccines has given hope, the ailing economy needs much
more than this budget.
1.10.13 Union Budget 2020-21: Analysing the Financial Proposals

• Some of the financial sector proposals unveiled by Finance Minister Nirmala Sitharaman in the Union
budget are bold.
o For one, Sitharaman has stated her intention to privatise two public sector banks — the first
such mention in recent budget speeches.
▪ Saying that a public sector bank will be privatised in the budget has more than a
symbolic value. It is also an acknowledgement that the government simply does not
have the resources to keep recapitalising public sector banks.
▪ The government may have to bring legislative amendments to go ahead. Accomplishing
this, and then expanding the privatisation programme to other public sector banks will
also require the government to expend political capital to convince the bank employee
unions.
o Second, she has proposed setting up a new structure to deal with the vexed issue of bad loans.
▪ Sitharaman has proposed creating a framework — a bad bank of sorts — for tackling
the issue of bad loans that is likely to escalate in the coming months.
▪ An asset reconstruction and management company will be set up to take over the bad
loans of banks. While this will clear the banks’ balance sheets — the Reserve Bank of
India (RBI) expects banks’ non-performing loans to rise to 13.5 per cent at the end of
September 2021, up from 7.5 per cent in September 2020 — freeing them up to lend
to the broader economy, several issues will need to be addressed: Who will fund the
bad bank? At what prices will the transactions between the bad bank and the banks
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take place? Will the process be transparent? Doesn’t this simply absolve bankers of
their past errors, while encouraging them to continue with the same lending practices?
o And third, to help finance long gestation infrastructure projects, a new Development Financial
Institution (DFI) will be set up.
▪ With the public sector bank-led model of infrastructure financing broken, Sitharaman
has also proposed setting up a Development Financial Institution. The budget has
allocated Rs 20,000 crore towards the new institution’s capital base, to enable it to lend
Rs 5 lakh crore over the next three years.
▪ But this is not a new solution. India has experimented with DFIs before, and the
experience has not been encouraging. DFIs like ICICI and IDBI were converted into
universal banks.
▪ Scaling up may prove to be challenging, and political considerations may affect
decisions.
▪ Falling back on the DFI model also signals an acknowledgement of the absence of a
deep and vibrant bond market which could have facilitated long-term infrastructure
financing.
2 Economic Survey 2020-21

2.1 Saving Lives and Livelihoods amidst a Once-in-a-Century Crisis
(Volume 1 – Chapter 1)
Q.) Analyze India’s response to Covid-19 pandemic. Do you think that India has been successful in
tackling the threat posed by Covid-19?
• The Covid-19 pandemic engendered a once-in-a-century global crisis in 2020. Faced with
unprecedented uncertainty at the onset of the pandemic, India focused on saving lives and livelihoods
by its willingness to take short-term pain for long-term gain.
• India’s response stemmed from the humane principle that while GDP growth will recover from the
temporary shock caused by an intense lockdown, human lives that are lost cannot be brought back.
• The response drew on epidemiological and economic research, especially those pertaining to the
Spanish Flu, which highlighted that an early, intense lockdown provided a win-win strategy to save
lives, and preserve livelihoods via economic recovery in the medium to long-term. This strategy was
also tailored to India’s unique vulnerabilities to the pandemic.
• The strategy was also motivated by the Nobel-Prize winning research in Hansen & Sargent (2001)
that recommends a policy focused on minimizing losses in a worst case scenario when uncertainty is
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very high. Faced with an unprecedented pandemic and the resultant uncertainty, loss of scores of
human lives captured thus the worst case scenario.
• India’s strategy flattened the curve, pushed the peak to September, 2020, and helped transform the
short-term trade-off between lives and livelihoods into a win-win in the medium to long-term that
saves both lives and livelihoods. After the September peak, India has been unique in experiencing
declining daily cases despite increasing mobility.
• While the lockdown resulted in a 23.9 per cent contraction in GDP in Q1, the recovery has been a V-
shaped one as seen in the 7.5 per cent decline in Q2 and the recovery across all key economic
indicators.
• Unlike previous crises, the Covid pandemic affects both demand and supply. India was the only
country to announce a slew of structural reforms to expand supply in the medium to long term and
avoid long-term damage to productive capacities.
• On the demand side, India’s policies have been calibrated to ensure that the accelerator is slowly
pushed down only when while the brakes are being removed on economic activities. A public
investment programme centred around the National Infrastructure Pipeline is likely to accelerate
the demand push and further the recovery.
• The upturn in the economy while avoiding a second wave of infections makes India a sui generis case
in strategic policymaking amidst a once-in-a-century pandemic.
2.2 Does Growth lead to Debt Sustainability? Yes, But Not Vice- Versa!
Q.) Discuss the desirability of using counter-cyclical fiscal policy to enable growth during economic
downturns.
• ES establishes clearly that growth leads to debt sustainability in the Indian context but not necessarily
vice-versa. This is because the interest rate on debt paid by the Indian government has been less
than India’s growth rate by norm, not by exception. As Blanchard (2019) explains in his 2019
Presidential Address to the American Economic Association: “If the interest rate paid by the
government is less than the growth rate, then the intertemporal budget constraint facing the
government no longer binds.” This phenomenon highlights that debt sustainability depends on the
“interest rate growth rate differential” (IRGD), i.e. the difference between the interest rate and the
growth rate in an economy.
• In advanced economies, the extremely low interest rates, which have led to negative IRGD, on the one
hand, and have placed limitations on monetary policy, on the other hand, have caused a rethink of
the role of fiscal policy. The same phenomenon of a negative IRGD in India – not due to lower interest
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rates but much higher growth rates – must prompt a debate on the saliency of fiscal policy, especially
during growth slowdowns and economic crises.
• Growth causes debt to become sustainable in countries with higher growth rates; such clarity about
the causal direction is not witnessed in countries with lower growth rates.
• As the COVID-19 pandemic has created a significant negative shock to demand, active fiscal policy –
one that recognises that fiscal multipliers are disproportionately higher during economic crises than
during economic booms – can ensure that the full benefit of seminal economic reforms is reaped by
limiting potential damage to productive capacity. As the IRGD is expected to be negative in the
foreseeable future, a fiscal policy that provides an impetus to growth will lead to lower, not higher,
debt-to-GDP ratios. In fact, simulations undertaken till 2030 highlight that given India’s growth
potential, debt sustainability is unlikely to be a problem even in the worst scenarios. ES 2020-21
thus demonstrates the desirability of using counter-cyclical fiscal policy to enable growth during
economic downturns.
• While acknowledging the counterargument from critics that governments may have a natural
proclivity to spend, the Survey endeavours to provide the intellectual anchor for the government to
be more relaxed about debt and fiscal spending during a growth slowdown or an economic crisis. The
Survey’s call for more active, counter-cyclical fiscal policy is not a call for fiscal irresponsibility. It is a
call to break the intellectual anchoring that has created an asymmetric bias against fiscal policy.
Relevance of Counter-cyclical Fiscal Policy

Indian Kings used to build palaces during famines and droughts to provide employment and improve
the economic fortunes of the private sector. Economic theory, in effect, makes the same
recommendation: in a recessionary year, Government must spend more than during expansionary
times. Such counter-cyclical fiscal policy stabilizes the business cycle by being contractionary (reduce
spending/increase taxes) in good times and expansionary (increase spending/reduce taxes) in bad
times. On the other hand, a pro-cyclical fiscal policy is the one wherein fiscal policy reinforces the
business cycle by being expansionary during good times and contractionary during recessions.
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Channels of Transmission
• Recalling the National Income identity , Y= C+I+G+X-M , the net effect of a recession on the private
sector may be in terms of lower private consumption (C), lower private investment (I), risk aversion
by the private sector and pessimistic expectations/sentiments. In such a scenario, adopting a
counter cyclical policy by expanding the Government Expenditure – both consumption and
investment - will support the GDP and minimise the output gap (as seen in the figure above). This
happens primarily through the following channels:
• An expansion in Government expenditure can cushion the contraction in output by contributing to
the GDP growth, by offsetting the decline in consumption and investment; and also by boosting
private investment and consumption through higher spending multipliers during recession.
• Through risk multiplier by compensating for greater risk-aversion of private sector to bring back
‘animal spirits’.
• Through expectation multiplier by building confidence in tough times: Governments adopting
counter-cyclical fiscal policy are able to credibly exhibit their commitment to sound fiscal
management. As a result, rational agents in the economy would expect the economy not to
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fluctuate as much and therefore their private actions would reinforce this, in turn enabling stronger
macroeconomic fundamentals.
For India, in the current scenario, when private consumption, which contributes to 54 per cent of GDP
is contracting, and investment, which contributes to around 29 per cent is uncertain, the relevance of
counter-cyclical fiscal policies is paramount. In fact, a sustained, productive program of permanent
stimulus directed towards public investment, in both physical and human capital, is the need of the
hour
2.3 Does India’s Sovereign Credit Rating Reflect Its Fundamentals? No!
Q.) ‘If India were to adopt the path of counter-cyclical fiscal policy, there is a possibility that India’s
sovereign credit ratings may be further downgraded.’ In the light of the above statement, discuss the
relevance of India’s sovereign credit ratings.
• Never in the history of sovereign credit ratings has the fifth largest economy in the world been rated
as the lowest rung of the investment grade (BBB-/Baa3). Reflecting the economic size and thereby
the ability to repay debt, the fifth largest economy has been predominantly rated AAA. China and
India are the only exceptions to this rule – China was rated A-/A2 in 2005 and now India is rated BBB-
/Baa3.
• India’s sovereign credit ratings do not reflect its fundamentals. Within its sovereign credit ratings
cohort – countries rated between A+/A1 and BBB-/Baa3 for S&P/ Moody’s – India is a clear outlier on
several parameters, i.e. it is rated significantly lower than mandated by the effect on the sovereign
rating of the parameter. These include GDP growth rate, inflation, general government debt (as per
cent of GDP), cyclically adjusted primary balance (as per cent of potential GDP), current account
balance (as per cent of GDP), political stability, rule of law, control of corruption, investor
protection, ease of doing business, short-term external debt (as per cent of reserves), reserve
adequacy ratio and sovereign default history. This outlier status remains true not only now but also
during the last two decades.
• Credit ratings map the probability of default and therefore reflect the willingness and ability of
borrower to meet its obligations. India’s willingness to pay is unquestionably demonstrated through
its zero sovereign default history. India’s ability to pay can be gauged not only by the extremely low
foreign currency denominated debt of the sovereign but also by the comfortable size of its foreign
exchange reserves that can pay for the short term debt of the private sector as well as the entire
stock of India’s sovereign and non-sovereign external debt. India’s forex reserves can cover an
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additional 2.8 standard deviation negative event, i.e. an event that can be expected to manifest with
a probability of less than 0.1 per cent after meeting all short-term debt.
• As ratings do not capture India’s fundamentals, it comes as no surprise that past episodes of
sovereign credit rating changes for India have not had major adverse impact on select indicators such
as Sensex return, foreign exchange rate and yield on government securities. Past episodes of rating
changes have no or weak correlation with macroeconomic indicators.
• India’s fiscal policy, therefore, must not remain beholden to a noisy/biased measure of India’s
fundamentals and should instead reflect Gurudev Rabindranath Thakur’s sentiment of a mind
without fear.
• Despite ratings not reflecting fundamentals, they can however be pro-cyclical and can affect equity
and debt FPI flows of developing countries, causing damage and worsening crisis. It is therefore
imperative that sovereign credit ratings methodology be made more transparent, less subjective and
better attuned to reflect economies’ fundamentals.
2.4 Inequality and Growth: Conflict or Convergence?

Q.) It is said that inequality is no accident but an essential feature of capitalism. Do you agree? What
should be India’s approach for lifting millions out of poverty?
• The Economic Survey 2019-20 argued that ethical wealth creation – by combining the invisible hand
of markets with the hand of trust – provides the way forward for India to develop economically. An
often-repeated concern expressed with this economic model pertains to inequality.
• Some commentary, especially in advanced economies post the Global Financial Crisis, argues that
inequality is no accident but an essential feature of capitalism. Such commentaries, thus, highlight a
potential conflict between economic growth and inequality.
• Could the fact that both the absolute levels of poverty and the rates of economic growth are low in
advanced economies generate this conflict? If so, could it be that a developing economy such as India
can avoid this conflict – at least in the near future – because of the potential for high economic
growth, on the one hand, and the significant scope for lifting millions out of poverty, on the other
hand? This question becomes pertinent especially because of the inevitable focus on inequality
following the COVID-19 pandemic.
• By examining the correlation of inequality and per-capita income with a range of socio-economic
indicators, including health, education, life expectancy, infant mortality, birth and death rates, fertility
rates, crime, drug usage and mental health, the ES 2020-21 highlights that both economic growth –
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as reflected in the income per capita at the state level –and inequality have similar relationships with
socio-economic indicators.
• Thus, unlike in advanced economies, in India economic growth and inequality converge in terms of
their effects on socio-economic indicators. Furthermore, ES 2020-21 finds that economic growth has
a far greater impact on poverty alleviation than inequality.
• Therefore, given India’s stage of development, India must continue to focus on economic growth to
lift the poor out of poverty by expanding the overall pie. Note that this policy focus does not imply
that redistributive objectives are unimportant, but that redistribution is only feasible in a developing
economy if the size of the economic pie grows.
2.5 Healthcare takes Centre Stage, Finally!

Q.) "It is health that is real wealth and not pieces of gold and silver - Mohandas K. Gandhi.” What steps
should India take to strengthen its healthcare sector?
• The recent COVID-19 pandemic has emphasised the importance of healthcare sector and its inter-
linkages with other key sectors of the economy. The ongoing pandemic has showcased how a
healthcare crisis can get transformed into an economic and social crisis.
• Healthcare policy must not become beholden to “saliency bias”, where policy overweights a recent
phenomenon. To enable India to respond to pandemics, the health infrastructure must be agile.
• The National Health mission (NHM) has played a critical role in mitigating inequity as the access of
the poorest to pre-natal and post-natal care as well as institutional deliveries has increased
significantly. Therefore, in conjunction to with Ayushman Bharat, the emphasis on NHM should
continue.
• An increase in public spend from 1 per cent to 2.5-3 per cent of GDP – as envisaged in the National
Health Policy 2017 – can decrease the OOPE from 65 per cent to 30 per cent of overall healthcare
spend.
• A sectoral regulator to undertake regulation and supervision of the healthcare sector must be
considered given the market failures stemming from information asymmetry; WHO also highlights
the growing importance of the same.
• The mitigation of information asymmetry would also help lower insurance premiums, enable the
offering of better products and help increase the insurance penetration in the country. Information
utilities that help mitigate the information asymmetry in healthcare sector can be very useful in
enhancing overall welfare.
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• Telemedicine needs to be harnessed to the fullest by investing in internet connectivity and health
infrastructure.
Indian Healthcare Currently

Despite improvements in healthcare access and quality (healthcare access and quality scored at 41.2 in
2016, up from 24.7 in 1990), India continues to underperform in comparison to other Low and Lower
Middle Income (LMIC) countries. On quality and access of healthcare, India was ranked 145th out of
180 countries (Global Burden of Disease Study 2016). Only few sub-Saharan countries, some pacific
islands, Nepal and Pakistan were ranked below India.
Poor health outcomes: Despite improvements in MMR and IMR, India still needs to improve
significantly on these metrics. Countries such as China, Bangladesh, Bhutan, Cambodia, etc. have
improved much more on these metrics than India.
Low access and utilization: At 3-4 per cent, the hospitalisation rates in India are among the lowest in
the world; the average for middle income countries is 8-9 per cent and 13-17 per cent for OECD
countries Given the increasing burden of NCD, lower life expectancy, higher MMR and IMR, the low
hospitalisation rates are unlikely to reflect a more healthy population as compared to middle income
or OECD countries. Thus, the low hospitalisation rates reflect lower access and utilisation of healthcare
in India.
High out-of-pocket health expenditures: India has one of the highest levels of OOPE in the world.
However, recent data show that the distribution of the public subsidy has improved in favour of the
poor, more clearly in maternity and child healthcare. In recent times, the percentage of the poorest
utilising prenatal care through public facilities has increased from 19.9 per cent to 24.7 per cent from
2004 to 2018, and there is a similar increase in the percentage of the poor accessing institutional
delivery as well as post-natal care.
Low budget allocations for healthcare: As health is a state subject in India, spending on healthcare by
states matters the most when examining government healthcare spending. According to National
Health Accounts, 2017, 66 per cent of spending on healthcare is done by the states. India ranks 179th
out of 189 countries in prioritization accorded to health in its government budgets (consolidated union
& state government). This prioritisation of health in India is similar to donordependent countries such
as Haiti and Sudan, and well short of its peers in development.
Low human resources for health: Health status of any country crucially depends on the available health
infrastructure in general and human resources for health. World Health Organization (WHO) identified
an aggregate density of health workers to be 44.5 per 10,000 population and an adequate skill-mix of
health workers to achieve composite SDG tracer indicators index by 2030 (WHO 2019). The WHO also
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specified a lower range of 23 health workers per 10,000 population to achieve 80 per cent of births
attended by skilled health professionals. Although aggregate human resources for health density in
India is close to the lower threshold of 23, the distribution of health workforce across states is lop-sided.
Also, the skill mix (doctor/nurse-midwives ratio) is far from adequate.
2.6 Process Reforms

Q.) ‘International comparisons show that the problems of India’s administrative processes derive less
from lack of compliance to processes or regulatory standards, but from overregulation.’ Elaborate
• It is not possible to have complete regulations in a world which has uncertainty as it is not possible
to account for all possible outcomes. The evidence, however, shows that India over-regulates the
economy. This results in regulations being ineffective even with relatively good compliance with
process.
• ES 2020-21 argues that the root cause of the problem of over-regulation is an approach that attempts
to account for every possible outcome. This is illustrated by a study of the time and procedures
needed to voluntarily close a company in India, even when there is no outstanding dispute or
litigation. Even when there is no dispute/ litigation and all paperwork is complete, it takes 1570 days
to be stuck off from the records. This is an order of magnitude longer than what it takes in other
countries.
• Both economic theory and evidence shows that in an uncertain and complex world, it is not possible
to write regulations that account for all possible outcomes. This makes discretion unavoidable in
decision-making. The attempt to reduce discretion by having ever more complex regulations,
however, results in even more non-transparent discretion.
• Real-world regulation is inevitably incomplete because of the combination of: (i) bounded rationality
due to “unknown unknowns”, (ii) complexity involved in framing “complete” contracts across all
possible contingencies, and (iii) the difficulty for a third party to verify decisions. This makes some
discretion unavoidable in decision making.
• The solution is to simplify regulations and invest in greater supervision which, by definition, implies
willingness to allow some discretion.
• The optimal solution is to have simple regulations combined with transparent decision making
process. Having provided the government decision maker with discretion, it is important then to
balance it with three things- improved transparency, stronger systems of ex-ante accountability
(such as bank boards) and ex-post resolution mechanisms. As an illustration, the chapter shows how
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the new Government e Marketplace (GeM portal) has increased the transparency in pricing in
government procurement. This has not only reduced the cost of procurement but has also made it
easier for the honest government official to make decisions.
2.7 Regulatory Forbearance an emergency medicine, not staple diet!

Q.) Current regulatory forbearance on bank loans can be a double edged sword for Indian economy.
Drawing upon the lessons learnt in the aftermath of Global Financial Crisis, outline the steps that should
be taken to ensure that the build-up of Non-Performing Assets is kept to the minimum in the aftermath
of Covid-19.
• During the Global Financial Crisis, forbearance helped borrowers’ tide over temporary hardship
caused due to the crisis and helped prevent a large contagion.
• However, the forbearance continued long after the economic recovery, resulting in unintended and
detrimental consequences for banks, firms, and the economy.
• Given relaxed provisioning requirements, banks exploited the forbearance window to restructure
loans even for unviable entities, thereby window dressing their books.
• As a result of the distorted incentives, banks misallocated credit, thereby damaging the quality of
investment in the economy.
• Concerned that the actual situation might be worse than reflected on the banks’ books, RBI initiated
an Asset Quality Review to clean up bank balance sheets. While gross NPAs increased from 4.3% in
2014-15 to 7.5% in 2015-16 and peaked at 11.2% in 2017-18, the AQR could not bring out all the
hidden bad assets in the bank books and led to an under-estimation of the capital requirements. This
led to a second round of lending distortions, thereby exacerbating an already grave situation.
• The prolonged forbearance policies following the GFC thus engendered the recent banking crisis that
brought down investment rates and thereby economic growth in the country.
• Forbearance represents emergency medicine that should be discontinued at the first opportunity
when the economy exhibits recovery, not a staple diet that gets continued for years
• To enable policymaking that involves an exercise of judgement amidst uncertainty, ex-post inquests
must recognise the role of hindsight bias and not make the mistake of equating unfavorable
outcomes to either bad judgement, or worse, malafide intent.
• Given the problem of asymmetric information between the regulator and the banks, which gets
accentuated during the forbearance regime, an Asset Quality Review exercise must be conducted
immediately after the forbearance is withdrawn.
• The legal infrastructure for the recovery of loans needs to be strengthened de facto.
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2.8 Innovation: Trending Up but Needs Thrust, Especially from the Private Sector
Q.) ‘India’s reliance on “Jugaad innovation” risks missing the crucial opportunity to innovate, which is
a crucial ingredient for rapid economic growth.’ In light of the above statement, discuss the problems
and potential solutions that can help in making India a hub of innovation.
• India entered the top 50 innovating countries for the first time in 2020 since the inception of the
Global Innovation Index (GII) in 2007, by improving its rank from 81 in 2015 to 48 in 2020.
• India ranks first in Central and South Asia, and third amongst lower middle-income group
economies.
• Among the seven pillars of the GII, India ranks 27th in knowledge and technology outputs (KTO);
31st in market sophistication; 55th in business sophistication; 60th in human capital and research
(HCR); 61st in institutions; 64th in creative output; and 75th in infrastructure.
• The GII also highlights areas with scope for improvement. India ranks 107th on education sub-pillar,
mainly on account of ranking 118th on pupil-teacher ratio in secondary education; 115th on new
business per thousand population in ages 15-64; 108th on tertiary inbound mobility; 108th on ICT
access as well as ICT use; 105th on ease of starting a business; and 101st on females employed
with advanced degrees.
• The business sector in India contributes much less to gross expenditure on R&D (about 37 per cent)
when compared to businesses in each of the top ten economies (68 per cent on average). This is
despite the fact the tax incentives for R&D were more liberal in India when compared to those in
the top ten economies.
• The Government does a disproportionate amount of heavy-lifting on R&D by contributing 56 per
cent of the gross expenditure on R&D, which is three times the average contributed by
governments in the top ten economies.
• Indian government sector contributes the highest share of total R&D personnel (36 per cent) and
researchers (23 per cent) amongst the top ten economies (nine per cent on average). Indian
business sector’s contribution to the total R&D personnel (30 per cent) and researchers (34 per
cent) in the country is the second lowest amongst the top ten economies (over 50 per cent on
average).
• Yet, India’s gross expenditure on R&D at 0.65 per cent of GDP is much lower than that of the top 10
economies (1.5-3 per cent of GDP) primarily because of the disproportionately lower contribution
from the business sector.
• Indian residents contribute only 36 per cent of patents filed in India as compared to 62 per cent on
average in the top ten economies.
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• India must significantly ramp up investment in R&D if it is to achieve its aspiration to emerge as the
third largest economy in terms of GDP current US$. Mere reliance on “Jugaad innovation” risks
missing the crucial opportunity to innovate our way into the future.
• This requires a major thrust on R&D by the business sector. India’s resident firms must increase
their share in total patents to a level commensurate to our status as the fifth largest economy in
current US$.
• India must also focus on strengthening institutions and business sophistication to improve its
performance on innovation outputs.
2.9 JAY Ho: Ayushman Bharat’s Jan Arogya Yojana (JAY) and Health Outcomes
Q.) What has been the impact of rollout of Pradhan Mantri Jan Arogya Yojana on maternal and child
health in India?
• ES 2020-21 demonstrates strong positive effects on healthcare outcomes of the Pradhan Mantri Jan
Arogya Yojana (PM-JAY) – the ambitious program launched by Government of India in 2018 to provide
healthcare access to the most vulnerable sections. PM-JAY is being used significantly for high
frequency, low cost care such as dialysis and continued to be utilised without disruption even during
the Covid pandemic and the lockdown. General medicine – the overwhelmingly major clinical
specialty accounting for over half the claims - exhibited a V-shaped recovery after falling during the
lockdown and reached pre-COVID-19 levels in December 2020.
• PM-JAY enhanced health insurance coverage. Across all the states, the proportion of households
with health insurance increased by 54 per cent for the states that implemented PM-JAY while falling
by 10 per cent in states that did not. Similarly, the proportion of households that had health insurance
increased in Bihar, Assam and Sikkim from 2015-16 to 2019-20 by 89 per cent while it decreased by
12 per cent over the same period in West Bengal.
• From 2015-16 to 2019-20, infant mortality rates declined by 12 per cent for states that did not adopt
PM-JAY and by 20 per cent for the states that adopted it.
• Similarly, while states that did not adopt PM-JAY saw a fall of 14 per cent in its Under-5 mortality rate,
the states that adopted it witnessed a 19 per cent reduction.
• While states that did not adopt PM-JAY witness 15 per cent decline in unmet need for spacing
between consecutive kids, the states that adopted it recorded a 31 per cent fall.
• Various metrics for mother and child care improved more in the states that adopted PM-JAY as
compared to those who did not. Each of these health effects manifested similarly when we compare
Bihar, Assam and Sikkim that implemented PM-JAY versus West Bengal that did not.
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• While some of these effects stemmed directly from enhanced care enabled by insurance coverage,
others represent spillover effects due to the same. Overall, the comparison reflects significant
improvements in several health outcomes in states that implemented PM-JAY versus those that did
not. As the difference-in-difference analysis controls for confounding factors, the Survey infers that
PM-JAY has a positive impact on health outcomes.
2.10 The Bare Necessities

Q.) Write a note on the ‘Bare Necessities Index’ introduced in the Economic Survey 2020-21.
• Access to “the bare necessities” such as housing, water, sanitation, electricity and clean cooking fuel
are a sine qua non to live a decent life.
• ES 2020-21 examines the progress made in providing access to “the bare necessities” by constructing
a Bare Necessities Index (BNI) at the rural, urban and all India level. The BNI summarises 26
indicators on five dimensions viz., water, sanitation, housing, micro-environment, and other
facilities. The BNI has been created for all states for 2012 and 2018 using data from two NSO rounds
viz., 69th and 76th on Drinking Water, Sanitation, Hygiene and Housing Condition in India.
• Compared to 2012, access to “the bare necessities” has improved across all States in the country in
2018. Access to bare necessities is the highest in the States such as Kerala, Punjab, Haryana and
Gujarat while it is the lowest in Odisha, Jharkhand, West Bengal and Tripura.
• The improvements are widespread as they span each of the five dimensions viz., access to water,
housing, sanitation, micro-environment and other facilities. Inter-State disparities in the access to
“the bare necessities” have declined in 2018 when compared to 2012 across rural and urban areas.
This is because the States where the level of access to “the bare necessities” was low in 2012 have
gained relatively more between 2012 and 2018.
• Access to “the bare necessities” has improved disproportionately more for the poorest households
when compared to the richest households across rural and urban areas. The improvement in equity
is particularly noteworthy because while the rich can seek private alternatives, lobby for better
services, or if need be, move to areas where public goods are better provided for, the poor rarely have
such choices.
• Using data from the National Family Health Surveys, we correlate the BNI in 2012 and 2018 with
infant mortality rate and under-5 mortality rate in 2015-16 and 2019-20 respectively and find that
the improved access to “the bare necessities” has led to improvements in health indicators.
Similarly, we also find that improved access to “the bare necessities” correlates with future
improvements in education indicators.
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• The network of schemes designed to deliver these necessities include inter-alia the Swachh Bharat
Mission (SBM), National Rural Drinking Water Programme (NRDWP), Pradhan Mantri Awaas Yojana
(PMAY), Saubhagya, and Ujjwala Yojana. These Schemes were equipped with new features such as
use of technology, real time monitoring, geo-tagging of assets, social audit, embedded digital flow
of information, and direct benefit transfers wherever possible. As Economic Survey 2018- 19
highlights, these features improved the transparency in governance and enhanced the efficiency and
effectiveness of the Schemes.
Government Schemes for Bare Necessities

1. Swachh Bharat Mission-Rural and Urban
Objectives:
• Objective of SBM-Rural was to attain Open Defecation Free (ODF) India by 2nd October, 2019 by
providing access to toilet facilities to all rural households in the country.
• Objective of SBM-Uuban is to achieve 100 per cent Open Defecation Free (ODF) status and 100 per
cent scientific processing of the Municipal Solid Waste (MSW) being generated in the country.
Targets & Achievements:
• Under SBM, rural sanitation coverage has made an incredible leap in the target achievement with
more than 10 crore toilets built across rural India. With a view to sustain the gains made under the
programme in the last five years and to ensure that no one is left behind and to achieve the overall
cleanliness in villages, phase II of SBM(G) from 2020-21 to 2024-25 is being implemented focusing
on ODF sustainability and Solid & Liquid Waste Management (SLWM) through convergence
between different verticals of financing and various Schemes of Central and State Governments
such as 15th Finance Commission grants to local bodies, MNREGS, Corporate Social Responsibility
(CSR) funds etc.
• Since its launch in 2014, SBM-U has made significant progress in the area of both sanitation and
solid waste management. 4,327 Urban Local Bodies (ULBs) have been declared ODF so far. This has
been made possible through construction of more than 66 lakhs individual household toilets and
over 6 lakhs community/ public toilets, far exceeding the Mission’s targets. The Mission is now
focusing on holistic sanitation through its ODF+ and ODF++ protocols with a total of 1,319 cities
certified ODF+ and 489 cities certified ODF++ as on date. In the area of solid waste management,
100 per cent of wards have complete door-to door collection. Further, out of 1,40,588 Tonnes Per
Day (TPD) waste generated per day, 68 per cent (i.e., 95,676 TPD) is being processed.
2. Pradhan Mantri Awaas Yojana (PMAY)
Objectives:
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PMAY intends to provide housing for all in urban and rural areas by 2022.
• Under PMAY (Urban), as on 18th January, 2021, 109.2 lakh houses have been sanctioned out of
which 70.4 lakh houses have been grounded for construction of which 41.3 lakh have been built to
the beneficiaries under PMAY(U) since inception of the scheme in June, 2015.
• The target number of houses for construction under PMAY (Gramin) is 2.95 crore in two phases i.e.
1.00 crore in Phase I (2016-17 to 2018-19) and 1.95 crore in Phase II (2019-20 to 2021-22). Since
2014-15, construction of approx. 1.94 crore rural houses have been completed, out of which 1.22
crore houses have been constructed under the revamped scheme of PMAY-G and 0.72 crore under
erstwhile Indira Awaas Yojana scheme.
3. NRDWP, now Jal Jeevan Mission (JJM)
Objectives:
• The objectives of the NRDWP was to provide safe and adequate water for drinking, cooking and
other domestic needs to every rural person on a sustainable basis. Goal of JJM is to provide
functional tap water connection (FTWC) every rural household by 2024 and get assured supply of
potable piped water at a service level of 55 litres per capita per day (lpcd) regularly on long-term
basis by ensuring functionality of the tap water connections.
• At the time of roll out of the scheme in August 2019, about 3.23 crore (17 per cent) households out
of total 18.93 crore rural households had tap water supply. Remaining 15.70 crore (83 per cent)
rural households were to be provided with functional tap water connections by 2024. Upto 16th
January, 2021, so far about 3.2 crore of rural households have been provided with FTWC since the
launch of the Mission. Keeping with ‘no one is left out’ principle, 18 districts in the country spread
across Gujarat (5), Telangana (5), Himachal Pradesh (1), Jammu & Kashmir (2), Goa (2) and Punjab
(3) have become ‘Har Ghar Jal districts’whereas 57,935 villages have also become ‘Har Ghar Jal
Gaon’.
4. Sahaj Bijli Har Ghar Yojana – Saubhagya
Objectives:
Government launched Saubhagya Yojana in October, 2017 with the objective to achieve universal
household electrification by providing electricity connections to all willing un-electrified households in
rural areas and all willing poor households in urban areas in the country, by March, 2019.
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• All States have declared electrification of all households on Saubhagya portal, except 18,734
households in Left Wing Extremists (LWE) affected areas of Chhattisgarh as on 31.03.2019.
Electricity connections to 262.84 lakh households have been released from 11.10.2017 to
31.03.2019. Subsequently, seven States reported that 19.09 lakh un-electrified households
identified before 31.03.2019, which were earlier un-willing but have expressed willingness to get
electricity connection. States have been asked to electrify these households under Saubhagya.
• These households are being electrified by the concerned States and as on 20.12.2019, electricity
connections to 7.42 lakh Households have been released.
5. Pradhan Mantri Ujjwala Yojana (PMUY)
Objectives:
• PMUY launched in May, 2016 in order to provide clean cooking fuel to poor households with a target
to provide 8 crore deposit free LPG connection. This connection is provided in the name of an adult
woman member of a poor family and the beneficiary has an option to avail connection with 14.2 kg
or 5 kg cylinder. The existing beneficiary with 14.2 kg LPG cylinder has an option to swap with 5 kg
cylinder also.
• Under PMUY, a target to provide 8 crore new LPG connections has been achieved in September,
2019, 7 months in advance of the target date of 31st March, 2020.
2.11 State of the Economy 2020-21: A Macro View

• The year 2020 threw at the world a bedlam of novel COVID-19 virus, threatening all that was taken
for granted –mobility, safety, and a normal life itself. This, in turn, posed the most formidable
economic challenge to India and to the world in a century.
• Bereft of a cure or a vaccine, public health policy became central to tackling this all-pervasive crisis.
The imperative of flattening the disease curve was entwined with the livelihood cost of an imminent
recession, which emanated from the restrictions in economic activities from the lockdown required
to contain the pandemic. This inherent trade-off led to the policy dilemma of “lives versus
livelihoods”.
• India recognised the disruptive impact of the pandemic and charted its own unique path amidst
dismal projections by several international institutions of the spread in the country given its huge
population, high population density and an overburdened health infrastructure.
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• The intense lockdown implemented at the start of the pandemic – when India had only a 100
confirmed cases – characterized India’s unique response in several ways.
• Governments and central banks across the world deployed a range of policy tools to support their
economies such as lowering key policy rates, quantitative easing measures, loan guarantees, cash
transfers and fiscal stimulus measures.
• Second, India recognised that the pandemic impacts both supply and demand in the economy. The
slew of reforms – again unique amidst all major economies – were implemented to ensure that the
supply-side disruptions, which were inevitable during the lockdown, are minimised in the medium
to long-run.
• The demand side policy reflected the understanding that aggregate demand, especially that for non-
essential items, reflects precautionary motives to save, which inevitably remains high when overall
uncertainty is high. Therefore, during the initial months of the pandemic when uncertainty was high
and lockdowns imposed economic restrictions, India did not waste precious fiscal resources in trying
to pump up discretionary consumption. Instead, the policy focused on ensuring that all essentials
were taken care of, which included direct benefit transfers to the vulnerable sections and the world’s
largest food subsidy programme targeting 80.96 crore beneficiaries. Government of India also
launched Emergency Credit Line Guarantee Scheme to provide much needed relief to stressed
sectors by helping entities sustain employment and meet liabilities.
• During the unlock phase, when uncertainty declined and the precautionary motive to save subsided,
on the one hand, and economic mobility increased, on the other hand, India has ramped up its fiscal
spending.
• A favorable monetary policy ensured abundant liquidity and immediate relief to debtors via
temporary moratoria, while unclogging monetary policy transmission. India’s demand-side policy,
thus, underscores the idea that pressing on the accelerator while the brakes are clamped only wastes
scarce fuel.
• India has been able to avoid the second wave while ably managing to flatten the epidemiological
curve, with its caseload peaking in mid-September. The initial stringent lockdown was critical to
saving lives and the V-shaped economic recovery. The continuous drop in daily cases and fatalities
bespeak India’s escape from a Sisyphus fate of backand-forth policy responses, enabling continual
unlocking of the economy.
• As anticipated, while the lockdown resulted in a 23.9 per cent contraction in GDP in Q1, the recovery
has been a V-shaped one as seen in the 7.5 per cent decline in Q2 and the recovery across all key
economic indicators. Starting July, a resilient V-shaped recovery is underway, as demonstrated by the
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recovery in GDP growth in Q2 after the sharp decline in Q1, a sustained resurgence in high frequency
indicators such as power demand, E-way bills, GST collection, steel consumption, etc.
• The reignited inter and intra state movement and record-high monthly GST collections have marked
the unlocking of industrial and commercial activity. A sharp rise in commercial paper issuances,
easing yields, and sturdy credit growth to MSMEs portend revamped credit flows for enterprises to
survive and grow. Imports contracted more sharply than exports, with Forex reserves rising to cover
18 months of imports. Inflation, mainly driven by food prices, remained above 6 per cent for much
of the year; the softening in December suggests easing of supply-side constraints.
• India’s GDP is estimated to contract by 7.7 per cent in FY2020-21, composed of a sharp 15.7 per cent
decline in first half and a modest 0.1 per cent fall in the second half. Sector-wise, agriculture has
remained the silver lining while contact-based services, manufacturing, construction were hit
hardest, and have been recovering steadily. Government consumption and net exports have
cushioned the growth from diving further down.
• The V-shaped economic recovery is supported by the initiation of a mega vaccination drive with
hopes of a robust recovery in the services sector. Together, prospects for robust growth in
consumption and investment have been rekindled with the estimated real GDP growth for FY 2021-
22 at 11 per cent.
2.12 Fiscal Developments

• "Precision Beats Power, and Timing Beats Speed“ — By Conor McGregor

• In the backdrop of an unprecedented crisis, the year 2020-21 has been a challenging one on the fiscal
front. The shortfall in revenue collection owing to the interruption in economic activity and the
additional expenditure requirements to mitigate the fallout of the pandemic on vulnerable people,
small businesses, and the economy in general, created immense pressure on the available limited
fiscal resources.
• In order to cater to the increased demand for resources, the target for gross market borrowings of
the Central Government for the financial year 2020-21 was revised from the Budget estimate of Rs
7.8 lakh crore to Rs 12 lakh crore.
• India, therefore, adopted a calibrated approach best suited for the evolving situation of the economy
in contrast to front-loaded large stimulus packages adopted by many countries. India's fiscal policy
reflected the understanding that aggregate demand, especially that for non-essential items, reflects
precautionary motives to save, which inevitably remains high when overall uncertainty is high.
Therefore, during the initial months of the pandemic when uncertainty was high and lockdown
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imposed economic restrictions, India did not waste precious fiscal resources in trying to pump up
discretionary consumption. Instead, the policy focused on ensuring that all essentials were taken care
of, which included direct benefit transfers to the vulnerable sections, emergency credit to the small
businesses, and the world’s largest food subsidy programme targeting 80.96 crore beneficiaries.
• During the unlock phase, when uncertainty declined and the precautionary motive to save subsided,
on the one hand, and economic mobility increased, on the other hand, India ramped up its fiscal
spending focusing on overall demand revival. India’s demand-side policy, thus, underscores the idea
that pressing on the accelerator while the brakes are clamped only wastes scarce fuel.
• Owing to the recovery of the economy over the past few months, the monthly revenue collections
have witnessed a revival. The monthly GST collections have crossed the Rs 1 lakh crore mark
consecutively for the last 3 months, reaching its’ highest ever in December 2020. Reforms in tax
administration have set in motion a process of transparency, accountability and more importantly,
enhancing the experience of an honest tax payer with the tax authority, thus incentivising tax
compliance.
• The expenditure policy for 2020-21 has been focused on re-prioritisation of expenditure according
to evolving situation, with an increasing emphasis on capital expenditure. Capital expenditure during
the last three months of the year 2020 recorded an unprecedented YoY growth of 129 per cent in
October, 249 per cent in November and 62 per cent in December. Keeping in view the revenue
shortfall and the demand for higher expenditure during the year, the Government is expected to
register a fiscal slippage in 2020-21.
• This deviation from the path of fiscal consolidation may however be transient as the fiscal indicators
rebound with the recovery in the economy. Thus, focusing on boosting GDP growth would be pivotal
for enabling a sustainable fiscal path in the medium term.
Measures taken by the Centre to support the States in times of COVID-19

The Central Government has taken consistent steps to impart unflinching support to the States in the
challenging times of the pandemic. These measures are as follows:
1. Enhanced limit of borrowing for FY2020-21 under Atma Nirbhar Bharat package
Under the Atma Nirbhar Bharat package, additional borrowing limit of up to 2 percent of Gross State
Domestic Product (GSDP) was allowed to the States, which was equivalent to Rs 4.27 lakh crore. Of the
additional 2 per cent borrowing allowed to the States, the first instalment of 0.5 per cent borrowing
was untied for all the states. The second part amounting to 1 per cent of GSDP was subject to
implementation of following four specific State level reforms, where weightage of each reform is 0.25
per cent of GSDP:-
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a) Implementation of One Nation One Ration Card System;
b) Ease of doing business reform;
c) Urban Local body/ utility reforms; and
d) Power Sector reforms
The final 0.5 per cent borrowing was conditional on undertaking at least 3 out of the above mentioned
reforms.
2. Compensation to the States for loss in GST revenue
In order to compensate the states for the loss of GST revenue during FY 2020-21, Central Government
had given the states an option to either borrow the shortfall arising out of GST implementation through
issue of debt under a Special Window coordinated by the Ministry of Finance which was passed on to
the States and UTs (Option 1), or raise the entire shortfall through the issue of market debt (Option 2).
All the 28 states and 3 UTs with legislature decided to go for option 1 which involves back-to-back
borrowing coordinated by the Ministry of Finance, and would ensure steady flow of resources similar
to the flow under GST compensation. The special window of Rs 1.1 lakh crore has been operationalised
since 23rd October, 2020 and the Government of India has already borrowed an amount of Rs 54,000
crore on behalf of the States in five instalments and passed it on to the States and UTs.
3. Scheme for Special Assistance to States for Capital Expenditure
During the year 2020-21, considering the fiscal environment faced by the State Governments due to
the shortfall in tax revenues arising from the COVID-19 pandemic, 'Scheme for Special Assistance to
States for Capital Expenditure', has been approved wherein special assistance is being provided to the
State Governments in the form of 50-year interest free loan up to an overall sum not exceeding Rs
12,000 crore.
4. SDRF
The Central Government by way of a special one-time dispensation had decided to treat COVID-19 as a
notified disaster for the purpose of providing assistance under SDRF. To strengthen the States to deal
with the pandemic, the Centre had released the 1st instalment of SDRF amounting to ` 11,092 crore to
State Governments in April 2020. In September 2020, the states’ limit for spending the SDRF during FY
2020-21 was raised to 50%, in order to support them in containment measures of COVID-19 including
measures for quarantine, sample collection and screening; and procurement of essential equipment/
labs for response to COVID-19.
2.13 External Sector

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• COVID-19 pandemic has triggered the worst global recession in 2020 since the Great Depression; the
adverse economic impact is, however, expected to be lesser than initially feared.
• The resulting economic crisis has led to a sharp decline in global trade, lower commodity prices and
tighter external financing conditions with varying implications for current account balances and
currencies of different countries. Global merchandise trade is expected to contract by 9.2 per cent in
2020. Trade balance with China and the US improved as imports contracted. The changing nature of
India’s global trade manifested in terms of sliding exports of gems and jewellery, engineering goods,
textile and allied products and improving exports of drugs and pharma, software and agriculture
and allied products. Pharma exports, in particular, used this opportunity to enhance their share in
total India’s exports and indicate India’s potential to be the pharmacy of the world.
• Supported by resilient software service exports, India is expected to witness a current account
surplus during the current financial year after a gap of 17 years. Balance on the capital account, on
the other hand, is buttressed by robust FDI and FPI inflows. These developments have led to accretion
of foreign exchange reserves that rose to an all-time high of US$ 586.1 billion as on January 8, 2021.
• RBI’s interventions in forex market have been largely successful in controlling the volatility and one-
sided appreciation of the rupee. High levels of headline inflation, however, posits the classical
trilemma before RBI to maintain a fine balance between tightening of monetary policy to control
inflation on the one hand and stimulate growth on the other hand.
• Against the aforesaid backdrop, various initiatives undertaken to promote exports, including
Production Linked Incentive (PLI) Scheme, Remission of Duties and Taxes on Exported Products
(RoDTEP), emphasis on improvement of trade logistics infrastructure and use of digital initiatives
would go a long way in enabling ‘ease of doing exports’.
INITIATIVES TAKEN BY GOVERNMENT TO BOOST EXPORTS

Trade Facilitation: With an aim to reduce trade barriers caused by inefficient and overly burdensome
regulatory administrative procedures, the Trade Facilitation Agreement (TFA), negotiated at WTO,
came into force on 22nd February 2017. India has been making proactive strides in TFA implementation
under the guidance of A National Committee on Trade Facilitation (NCTF). Many of the commitments,
which are otherwise due by 2022, have already been notified to WTO as implemented.
Remission of Duties and Taxes on Exported Products (RoDTEP): Government has rolled out a new WTO
compliant scheme, namely Remission of Duties and Taxes on Exported Products (RoDTEP), for all export
goods with effect from 1st January, 2021. Under this Scheme, duties and taxes levied at the Central,
State and local levels, such as electricity duties and VAT on fuel used for transportation, which are not
getting exempted or refunded under any other existing mechanism will be refunded to exporters in
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their ledger account with Customs. The credits can be used to pay basic customs duty on imported
goods or transferred to other importers – facilitating ease of transactions for exports. The RoDTEP rates
would be notified by the Department of Commerce.
Production-Linked Incentive (PLI) Scheme: In order to boost domestic manufacturing and exports, the
Production-Linked Incentive (PLI) scheme with an outlay of Rs 1.46 lakh crore has been introduced. This
Scheme aims to give incentive to companies on incremental sales from products manufactured in
domestic units. The ten-identified champion sectors under PLI scheme. The scheme is expected to make
Indian manufacturers in these ten sectors globally competitive, attract investment in the areas of core
competency and cutting-edge technology; ensure efficiencies; create economies of scale; establish
backward linkages with MSMEs; enhance exports and make India an integral part of the global supply
chain. It also incentivizes global, capital-rich companies to set up capacities in India. Growth in
production and exports of industrial goods will greatly expose the Indian industry to foreign
competition and ideas, which will help in improving its capabilities to innovate further. Promotion of
the manufacturing sector and creation of a conducive manufacturing ecosystem will not only enable
integration with the global supply chains but also establish backward linkages with the MSME sector in
the country. This will lead to overall growth in the economy and create huge employment opportunities.
Trade Related Logistics: Despite the sector being plagued by some structural issues such as highly
fragmented ownership; few large players; lack of consolidation in operations; sub-optimal modal share
with freight movement highly skewed towards road sector; lack of an integrated approach by user
sectors (multiple line ministries and agencies); absence of consistent policies and regulations; etc., India
has made remarkable progress in logistics sector. India’s rank has improved significantly in trading
across borders parameter of ‘Ease of Doing Business’ index from 146 in 2018 to 68 in 2020.
Important Infrastructure Initiatives which are at various stages of implementation are:

• Bharatmala Pariyojana is a new umbrella program for the highways sector that envisages building
more than 80,000 Km of roads, highways, greenfield expressways, bridges with an investment of
around US$ 107 billion.
• Sagarmala aims at Port Modernization & New Port Development, Port Connectivity Enhancement,
Port-linked Industrialization, Coastal Community Development and giving impetus to Coastal
Shipping. 508 projects have been identified and 111 waterways have been declared National
waterways, for which the work is ongoing in phases.
• Multi-Modal Logistics Parks shall act as hubs for freight movement enabling freight aggregation,
distribution and multi-modal transportation. They would provide modern mechanized warehousing
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space and value-added services such as customs clearance with bonded storage yards, warehousing
management services, etc.
• Dedicated Freight Corridors (DFCs) aims at reduction in unit cost of transportation with higher
speed of freight trains and better turnaround of wagons. Around 70 per cent of freight is expected
to shift to DFC, freeing up capacity on Indian Railways.
• Trade Infrastructure for Export Scheme (TIES) aims to assist creation of appropriate infrastructure
for growth of exports from the States.
2.14 Monetary Management and Financial Intermediation

• Given the unprecedented shock of COVID-19 pandemic, monetary policy was significantly eased from
March 2020 onwards.
• The repo rate has been cut by 115 bps since March 2020, with 75 bps cut in first Monetary Policy
Committee (MPC) meeting in March 2020 and 40 bps cut in second meeting in May 2020. The policy
rates were kept unchanged in further meetings, but the liquidity support was significantly enhanced.
Systemic liquidity in 2020-21 remained in surplus so far.
• RBI undertook various conventional and unconventional measures like Open Market Operations,
Long Term Repo Operations, Targeted Long Term Repo Operations etc. to manage liquidity situation
in the economy.
• The financial flows to the real economy however remained constrained on account of subdued credit
growth by both banks and Non-Banking Financial Corporations. The higher reserve money growth did
not fully translate into commensurate money supply growth due to the lower (adjusted) money
multiplier reflecting large deposits by banks with RBI under reverse repo. Credit growth of banks
slowed down to 6.7 per cent as on January 1,2021. The credit offtake from banking sector witnessed
a broad based slowdown in 2020-21.
• Gross Non Performing Assets ratio of Scheduled Commercial Banks decreased from 8.21 per cent at
the end of March 2020 to 7.49 per cent at the end of September 2020. However, this has to be seen
in conjunction with the asset classification relief provided to borrowers on account of the pandemic.
• Capital to risk-weighted asset ratio of Scheduled Commercial Banks increased from 14.7 per cent to
15.8 per cent between March 2020 and September 2020 with improvement in both Public and Private
sector banks.
• This year saw improvement in transmission of policy repo rates to deposit and lending rates, as
reflected in the decline of 94 bps and 67 bps in Weighted Average Lending Rate on fresh rupee loans
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and outstanding rupee loans respectively from March 2020 to November 2020. Similarly, the
Weighted Average Domestic Term Deposit Rate declined by 81 bps during the same period.
• The recovery rate for the Scheduled Commercial Banks through IBC (since its inception) has been
over 45 per cent. In view of COVID-19 pandemic, initiation of Corporate Insolvency Resolution Process
(CIRP) was suspended for any default arising on or after March 25, 2020 for a period of 6 months.
This was further extended twice for 3 months on September 24, 2020 and December 22, 2020. The
suspension along with continued clearance has allowed a small decline in accumulated cases.
2.15 Prices and Inflation

• CPI-Combined (C) inflation has moderated since 2013-14. However, inflation dynamics have changed
considerably in 2020.
• Overall, headline CPI inflation remained high during the COVID-19 induced lockdown period and
subsequently, due to the persistence of supply side disruptions. The rise in inflation was mostly driven
by food inflation, which increased to 9.1 per cent during 2020-21 (Apr-Dec). Due to COVID-19 induced
disruptions, an overall increase in the price momentum is witnessed, driving inflation since April 2020,
whereas positive base effect has been a moderating factor.
• The difference in rural-urban CPI inflation, which was high in 2019, saw a decline from November
2019 that continued in 2020.
• Inflation ranged between 3.2 per cent to 11 per cent across States/UTs in 2020-21 (Jun-Dec)
compared to (-) 0.3 per cent to 7.6 per cent in the same period last year.
• Thali prices for both vegetarian and nonvegetarian Thalis declined significantly in January-March
2020 before rising sharply during April to November in both rural and urban areas before easing in
December 2020. The easing in CPI-C is expected to ease Thali prices going forward.
• The Survey finds that sole focus on CPI-C inflation may not be appropriate for four reasons.
o First, food inflation, which contributes significantly to CPI-C is driven primarily by supply-side
factors.
o Second, given its role as the headline target for monetary policy, changes in CPI-C anchor
inflation expectations. This occurs despite inflation in CPI-C being driven by supplyside factors
that drive food inflation.
o Third, several components of food inflation are transitory with wide variations within the
food and beverages group.
o Finally, food inflation has been driving overall CPI-C inflation due to the relatively higher
weight of food items in the index. While food habits have undergone revisions over the
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decade since 2011-12, which is base year of CPI, the same is not reflected in the index yet.
The base year of CPI therefore needs to be revised to overcome the measurement error that
may be arising from the change in food habits.
• For all these reasons, a greater focus on core inflation is warranted.
• Further, given the significant increases in e-commerce transactions, new sources of price data
capturing e-commerce transactions must get incorporated in the construction of price indices.
• During the year, the government took several measures to make crucial drugs for COVID-19
treatment available at affordable prices, to stabilise prices of sensitive food items like banning of
export of onions, imposition of stock limit on onions, easing of restriction on imports of pulses etc.
• However, consistency in import policy of sensitive food items warrants attention as frequent
changes in import policy of pulses and edible oils adds to confusion and delays. To rein in the vegetable
inflation, review of relevant buffer stock policies is essential. To avoid supply-side disruptions that
cause inflation seasonality in vegetables, food, CPI-C and in inflation expectations, a system needs to
be developed to reduce wastages and ensure timely release of stock.
Measures to Control Inflation

• In the wake of rising prices of pulses, onion and potato, the Government has taken several steps to
improve the availability of these commodities and make them available to consumers at affordable
prices. These include:
o Banning the export of onion
o Imposition of stock limit on onion under the EC Act
o Easing of restrictions on imports, facilitating imports at integrated check-posts, issuance of
licenses for imports and reduction in import duties.
• Price Stabilization Fund (PSF) Scheme is being efficiently implemented and has succeeded in
achieving its objective of stabilizing prices of pulses and offered significant benefits to all
stakeholders. Government in 2016 has approved creation of a dynamic buffer of up to 20 lakh
tonnes of pulses for appropriate market intervention.
• States/UTs are also being encouraged to set up their own State level PSF. Till date, financial
assistance has been provided to Odisha, West Bengal, Andhra Pradesh, Telangana, Tamil Nadu and
Assam.
• Government of India has entered into a MoU with Mozambique to ensure assured supply of pulses
(Tur and other pulses) in India. The MoU envisages imports of 2 LMT pulses during 2020-21.
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Onion prices and buffer stock policy
Over the years, it has been observed that in the period August-November prices of onion skyrocket.
This happens despite the government efforts to create a buffer stock to sell the onion when retail prices
increase, exposing the absence of a suitable policy to ensure price stability of India’s staple vegetable.
Why Price Spikes in August to November?
Rabi harvesting takes place between March and May in most states and the crop is sold during June-
July period, kharif harvesting takes place between October and November and the crop is available in
the market till rabi harvest. The period between the two that is August to November is when we observe
the prices of onion rise sharply.
Suggestions
• NAFED approached state governments to send their requirements of lean months in advance to
ensure timely evacuation of the stored onion in a planned manner to have a salutary effect on retail
prices, which tend to go up in the period late August to November. However, this process could be
made more transparent and done further well in advance to ensure timely distribution.
• There should be a transparent online platform where all information relating to requirement details
by states, procurement undertaken state wise and month wise, amount disbursed state wise,
agency wise, month wise should be made available for better planning and decision making.
• In Maharashtra, Gujarat, Haryana, Madhya Pradesh and Western Uttar Pradesh largescale storage
of onions is taken in conventionally-designed structures. In other states, the storage is taken only
on small scale but now showing increasing trend after the post-harvest technology and improved
storage structures have been popularized by NHRDF. Traditional storage practices result in
substantial losses in stored onions, hence use of improved storage structures as well as use of good
storer varieties, judicious use of fertilizers, timely irrigation and post-harvest technology are
essential to reduce the losses in stored onions (Operation Greens portal).
• Develop an eVIN like tracking system: eVIN (electronic vaccine intelligence network) aims to
strengthen the evidence base for improved policy-making in vaccine delivery, procurement and
planning for new antigens in India. For onion supply we do not need such a complicated system but
a simple tracking system based on the principles of eVIN might be adequate. This can help provide
real-time information on onion stocks, track storage temperature and moisture level and alert the
authorities whenever any parameter is breached.
• Use of dehydrated onions that has longer shelf life should be promoted for buffer stock purpose.
Hydrated variety should be sold early.
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2.16 Sustainable Development and Climate Change
• Sustainable development remains core to India’s development strategy, despite several challenges
emerging on account of the unprecedented crisis due to COVID-19 pandemic.
• The pandemic has challenged the health infrastructure, adversely impacted livelihoods and
exacerbated the inequality in the food and nutritional availability in the country. This has
reemphasized the criticality of having institutions and mechanisms that can facilitate the country to
absorb exogenous shocks well.
• India has been taking several proactive climate actions to fulfil its obligations as per the principles of
common but differentiated responsibilities and respective capabilities and equity. The first priority
for India is adaptation as the country is highly vulnerable to extreme weather events.
• The NDC submitted by the country has been formulated keeping in mind the developmental
imperatives of the country and is on a “best effort basis”. In its NDC, India has sought to
o reduce the emissions intensity of its GDP by 33 to 35 per cent below 2005 levels by the year
2030;
o achieve 40 per cent of cumulative electric power installed capacity from non-fossil fuel
sources by 2030; and
o enhance forest and tree cover to create additional carbon sink equivalent to 2.5 to 3 billion
tons of carbon dioxide by 2030.
• The country is on its track to successfully decoupling its economic growth from GHG emissions. As
per the second BUR submitted in 2018, India’s emission intensity of GDP reduced by 21 per cent in
2014 over the level of 2005.
• The country is relying on domestic resources to implement adaptation and mitigation action on
mission mode. The financing considerations will remain critical especially as the country steps up the
targets substantially.
• The implementation of NDC has started from 1st January 2021. There is a huge gap between resource
availability and the requirements, implementation of wide-ranging NDC goals presents a major
challenge.
• COP 26 now scheduled in 2021 is expected to discuss and arrive at a consensus on transparency
mechanism; Article 6 (market and non-market mechanisms); common time frames for nationally
determined contributions; long-term climate finance etc. On finance matters, it is essential to arrive
at a consensus on the definition of climate finance and on a common accounting methodology for
assessment and evaluation of climate finance.
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• In 2017, to give push to green bonds issuances in India, SEBI issued guidelines on green bonds
including their listing of green bonds on the Indian stock exchanges. The cumulative issuance of
global green bonds crossed US$ 1 trillion mark in 2020.
• Climate risk insurance is an important tool for providing security against loss of livelihoods and of
assets as a consequence of disasters. Thus, given the significant contribution of the agricultural sector
in the Indian economy, coupled with looming “climatic aberrations,” crop insurance becomes a
necessity to mitigate the risks associated with a majority of the country’s farmers.
• ISA organized the First World Solar Technology Summit (WSTS) in September 2020 with an objective
of showcasing to member countries the state of the art and next generation solar technologies.
• CDRI is another expression of India’s commitment to work with all the partners to address global
challenges. The Coalition functions as an inclusive multi-stakeholder platform led and managed by
national governments, where knowledge is generated and exchanged on different aspects of disaster
resilience of infrastructure. As of December 2020, 19 countries and 4 multilateral organizations have
become members of the Coalition.
• The 2030 agenda for Sustainable Development with 17 Sustainable Development Goals (SDGs) and
169 associated targets encompasses a comprehensive developmental agenda integrating social,
economic and environmental dimensions. Several initiatives have been taken at both the national
and the sub national level to mainstream the SDGs into the policies, schemes and programmes of the
Government.
National Missions under NAPCC
Missions Major Objectives / Targets

National Solar Mission (NSM) Achieve 100 GW of solar power in seven years starting from 2014-15.
• To achieve growth with ecological sustainability.
• Mandating reduction in energy consumption in large
energyconsuming industries,
National Mission for
• Financing for PPP to reduce energy consumption through demand-
Enhanced Energy Efficiency
side management programs in the municipal, buildings, and
(NMEEE)
agricultural sectors,
• Energy incentives, including reduced taxes on energy-efficient
appliances.
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Improved ecosystem services by Increasing forest/tree cover by 5 m
National Mission for a Green
ha and improving quality of forest cover on another 5 m ha (a total of
India (GIM)
10 m ha).
• Development of sustainable habitat standards.
• Promoting energy efficiency as a core component of urban planning
by extending the existing Energy Conservation Building Code
National Mission on (ECBC).
Sustainable Habitat (NMSH) • Strengthening the enforcement of automotive fuel economy
standards, and
• Using pricing measures to encourage the purchase of efficient
vehicles and incentives for the use of public transportation.
• Focuses on monitoring of ground water, aquifer mapping, capacity
building, water quality monitoring and other baseline studies.
National Water Mission • Promoting citizen and state action for water conservation,
(NWM) augmentation, and preservation.
• Focusing attention on overexploited areas.
• Promoting basin-level integrated water resources management.
National Mission for Enhancing food security by making agriculture more productive,
Sustainable Agriculture sustainable, remunerative, and climate resilient.
• To continuously assess the health status of the Himalayan
Ecosystem. Enable policy bodies in their policy formulation
National Mission for
functions.
Sustaining Himalayan
• Start of new centres relevant to climate change in the existing
Ecosystems
institutions in the Himalayan States.
• Regional cooperation with neighbouring countries in Glaciology
• To gain a better understanding of climate science, formation of
National Mission on Strategic knowledge networks among the existing knowledge institutions
Knowledge for Climate engaged in research and development.
Change (NMSKCC) • Development of national capacity for modeling the regional impact
of climate change on different ecological zones within the country
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2.17 Agriculture & Food Management
• India’s agricultural sector has shown its resilience amid the adversities of COVID induced lockdowns.
The Agriculture and allied activities were the sole bright spot amid the slide in GDP performance of
other sectors, clocking a growth rate of 3.4 per cent at constant prices during 2020-21 (1st Advance
Estimates).
• As per the provisional estimates of national income released by CSO on 29th May, 2020, the share of
agriculture and allied sectors in Gross Value Added (GVA) of the country at current prices is 17.8 per
cent for the year 2019-20.
• Gross Capital Formation (GCF) in agriculture and allied sectors relative to GVA in this sector has been
showing a fluctuating trend from 17.7 per cent in 2013-14 to 16.4 per cent in 2018-19, with a dip to
14.7 per cent in 2015-16.
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• In the Agriculture year 2019-20 (as per Fourth Advance Estimates), total food grain production in the
country is estimated at record 296.65 million tonnes which is higher by 11.44 million tonnes than the
production of food grain of 285.21 million tonnes achieved during 2018-19.
• The agricultural credit flow target for the year 2019-20 was fixed at Rs 13,50,000 crores and against
this target the achievement was Rs 13,92,469.81 crores. The agriculture credit flow target for 2020-
21 has been fixed at Rs 15,00,000 crores and till 30th November, 2020 against this target a sum of Rs
9,73,517.80 crores has been disbursed.
• Consequent upon budget announcement on inclusion of livestock sector in Kisan Credit Card in
February 2020, 1.5 crores dairy farmers of milk cooperatives and milk producer companies’ were
targeted to provide Kisan Credit Cards (KCC) as part of Prime Minister’s Atma Nirbhar Bharat Package.
• As of mid January 2021, a total of 44,673 Kisan Credit Cards (KCCs) have been issued to fishers and
fish farmers and an additional 4.04 lakh applications from fishers and fish farmers are with the banks
at various stages of issuance.
• The PMFBY covers over 5.5 crore farmer applications year on year. As on 12th January, 2021, claims
worth Rs 90,000 crores have already been paid out under the Scheme. Aadhar seeding has helped in
speedy claim settlement directly into the farmer accounts. Even during COVID lock down period
nearly 70 lakh farmers benefitted and claims worth Rs 8741.30 crores were transferred to the
beneficiaries.
• An amount of Rs 18000 crore have been deposited directly in the bank account of 9 crore farmer
families of the country in December, 2020 in the 7th installment of financial benefit under the PM-
KISAN scheme.
• The livestock sector grew at CAGR of 8.24 per cent during 2014-15 to 2018-19. As per the estimates
of National Accounts Statistics (NAS) 2020 for sector wise Gross Value Added of agriculture and allied
sector, the contribution of livestock in total agriculture and allied sector GVA (at Constant Prices) has
increased from 24.32 per cent (2014-15) to 28.63 per cent (2018-19). The contribution of the livestock
sector was 4.19 per cent of total GVA in 2018-19.
• Fish production in India reached an all-time high of 14.16 million metric tons in 2019-20. Further, the
Gross Value Added (GVA) by the fisheries sector to the national economy stood at ` 2,12,915 crores
constituting 1.24 per cent of the total national GVA and 7.28 per cent of the agricultural GVA.
• During the last 5 years ending 2018-19, Food Processing Industries (FPI) sector has been growing at
an average annual growth rate of around 9.99 per cent as compared to around 3.12 per cent in
agriculture and 8.25 per cent in manufacturing at 2011-12 prices.
• Under the Pradhan Mantri Garib Kalyan Anna Yojana, 80.96 crores beneficiaries were provided
additional foodgrains, i.e. above the NFSA mandated requirements, of 5 kg per person per month
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free of cost till November, 2020. Over 200 LMT of foodgrains were provided amounting to a fiscal
outgo of over Rs 75000 Crores. Also, under Atma Nirbhar Bharat Package, 5 kg per person per month
was distributed for four months (May to August) to benefit approximately 8 crores migrants who are
not covered under NFSA or state ration card entailing subsidy of Rs 3109 crores approximately.
• About 54.6 per cent of the total workforce in the country is still engaged in agricultural and allied
sector activities (Census 2011). Various interventions of the Government for the development of
allied sectors including animal husbandry, dairying and fisheries exhibit its resolve towards tapping
the potential of allied sectors to further enhance farm welfare.
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2.18 Industry and Infrastructure
• The Indian economy encountered a “once in a century” crisis due to the COVID-19 pandemic that
affected economic activities and consequently impacted the livelihood of billions of people. The
industrial sector, not an exception to this shock, experienced a sharp decline during the period of the
lockdown. The economic activity, however, started recovering as the unlocking process began.
• The various subcomponents of Index of Industrial Production (IIP) and eight-core index have
experienced a V-shaped recovery with consistent movement being seen towards the pre-crisis levels.
• The broad-based quick revival of the industrial activity stemmed from remedial measures, reforms,
and the sizable stimulus package announced by the Government of India (GoI) under the Atmanirbhar
Bharat package.
• Based on the IIP, the industrial activity contracted by 1.9 per cent in November-2020 recovering from
the nadir of -57.3 per cent in April-2020. Further improvement and firming up in industrial activities
are foreseen with the Government enhancing capital expenditure as highlighted in the fiscal policy
chapter, the vaccination drive and the resolute push forward on long pending reform measures.
• As per the Doing Business Report (DBR), 2020, the rank of India in the Ease of Doing Business (EoDB)
Index for 2019 has moved upwards to the 63rd position amongst 190 countries from a rank of 77th
in 2018. India has improved its position in 7 out of 10 indicators, inching up to the international best
practices. The DBR, 2020 acknowledges India as one of the top 10 improvers, the third time in a row,
with an improvement of 67 ranks in three years. It is also the highest jump by any large country since
2011.
• During FY20, total FDI equity inflows were US$49.98 billion as compared to US$44.37 billion during
FY19. The similar number for FY21 (up to September-2020) was US$30.0 billion. The bulk of FDI equity
flow is in the non-manufacturing sector leading to a reduction in the share of manufacturing in the
FDI flows. Within the manufacturing sector, industries like automobile, telecommunication,
metallurgical, non-conventional energy, chemical (other than fertilizers), food processing, and
petroleum & natural gas get the bulk of FDI equity flows.
• With the objective of enhancing India’s manufacturing capabilities and exports, the GoI has
introduced the Production-Linked Incentive (PLI) Scheme in the 10 key sectors under the aegis of
Atmanirbhar Bharat. The scheme will be implemented by the concerned ministries with an overall
expenditure estimated at Rs.1.46 lakh crores and with sector specific financial limits.
Relief and credit support to MSMEs to fight against COVID-19

1. Rs 3 lakh crores Collateral-free Automatic Loans for Businesses, including MSMEs.
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2. Rs 20,000 crores Subordinate Debt for Stressed MSMEs
3. Rs 50,000 crores equity infusion through MSME Fund of Funds
4. New definition of MSME
5. Global tenders to be disallowed upto Rs 200 crores
6. MSME receivables from the Government and the CPSEs to be released in 45 days.
7. Relief of Rs 1500 crores to MUDRA- Shishu loan
8. Ease of doing business for business including MSMEs
Public Sector Enterprise Policy for a New, Self-reliant India

• Government to announce a new coherent policy—where all sectors are open to the private sector
while public sector enterprises (PSEs) will play an important role in defined areas
• List of strategic sectors requiring presence of PSEs in public interest will be notified
• In strategic sectors, at least one enterprise will remain in the public sector but private sector will
also be allowed
• In other sectors, PSEs will be privatized (timing to be based on feasibility etc.)
• To minimize wasteful administrative costs, number of enterprises in strategic sectors will ordinarily
be only one to four; others will be privatized/merged/ brought under holding companies.
Initiative Taken by GoI to Support Startups in India

• Startups Intellectual Property Protection (SIPP) scheme enables a start-up to seek assistance from
any empanelled facilitator to file and prosecute their application. The facilitator can claim payment
for the services given to the start up from the Office of the Controller General of Patents, Designs
and Trademarks (O/o CGPDTM) on submission of certificate in prescribed format.
• The Fund of Funds for Startups (FFS) with a total corpus of Rs. 10,000 crores was established with
contribution spread over the 14th and 15th Finance Commission cycle based on the progress of
implementation.
• So far 319 startups have been granted income tax exemptions till November-2020.
• StartupYatra (an initiative that travels to Tier 2 andTier 3 cities of India to search for entrepreneurial
talent by conducting day long bootcamps) has been conducted across 23 States in 207 districts.
• Further to boost innovation in the sector and encourage the youths to secure their rights on
technology and the product developed by them, startup have been provided 80 per cent rebate in
patent filing fees and 50 per cent rebate on trademark filing fees. Additionally, facility of expedited
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examination of patent applications to reduce the time taken in granting patents is also available to
the startups.
2.19 Services
• The COVID-19 pandemic, the subsequent lockdown and social distancing measures have had a
significant impact on the contact-intensive services sector.
• During the first half of the financial year 2020-21, the services sector contracted by almost 16 per
cent. Air passenger traffic, rail freight traffic, port traffic, foreign tourist arrivals, and foreign
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exchange earnings all contracted sharply following the first lockdown which was announced in March,
2020.
• As the economy gradually entered the unlock phase, most of these indicators showed signs of
recovery. Services purchasing managers’ index, rail freight traffic, and port traffic have bottomed
out and are rising steadily now, showing a V-shaped recovery. Domestic passenger air traffic is also
increasing gradually on a monthly basis, although travel remains muted as compared to last year.
• Interestingly, in spite of the global disruptions, FDI inflows into the services sector increased by 34
per cent YoY during April-September 2020 to reach US$ 23.61 billion.
• The year 2020-21 witnessed many significant structural reforms. The space sector was opened up,
telecom related regulations were removed from the IT-BPO sector, and consumer protection
regulations were introduced for e-commerce.
• India’s space sector has grown exponentially in the past six decades. India spent about US$ 1.8 billion
on space programmes in 2019-20. However, the country still lags behind major players in the sector,
such as USA, China and Russia. The Indian Space ecosystem is undergoing several policy reforms to
engage private players and attract innovation and investment.
• The Indian start-up ecosystem has been progressing well amidst the Covid-19 pandemic. India is
home to 38 unicorns, adding a record number of 12 start-ups to the unicorn list last year.
• The shipping turnaround time at ports has almost halved from 4.67 days in 2010-11 to 2.62 days in
2019-20. As per the latest UNCTAD data, the median ship turnaround time globally is 0.97 days,
suggesting that India has room to further improve upon the efficiency at ports.
• Services sector’s significance in the Indian economy has been steady, with the sector now accounting
for over 54 per cent of the economy and almost four-fifths of total FDI inflows.
2.20 Social Infrastructure, Employment and Human Development

• Year 2020 began with the once-in-a-century pandemic, which saw the frontline health workers
working tirelessly to save human lives from COVID-19. While the pandemic caused its ripples on the
economy and on the social sector, Governments at the Centre and States intervened in a timely
manner to respond to the pandemic.
• India has one of the lowest case fatality rates of less than 1.5 per cent. India has been able to save
lakhs of lives through its effective policy response. Public spending on social sector was increased in
2020-21 to mitigate the hardships caused by the pandemic and the loss to livelihood due to the
lockdown.
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• India’s rank in HDI 2019 was recorded 131 compared to 129 in 2018, out of a total 189 countries. By
looking at the sub-component wise performance of HDI indicators, India's "GNI per capita (2017 PPP
$)" has increased from US$ 6,427 in 2018 to US$ 6,681 in 2019, and "life expectancy at birth" has
improved from 69.4 to 69.7 year, respectively, mean and expected years of schooling remained
unchanged.
• Online schooling took off in a big way during the COVID-19 pandemic. The access to data network,
electronic devices such as computer, laptop, smart phone etc. gained in importance due to online
learning and remote working. Innovative measures were adopted to bring all strata of the society
under the medium of online/digital schooling.
• Formal skill training showed an improvement over the annual cycle of PLFS across all socio-economic
classification including rural, urban and gender classification.
• Year 2018-19 was witnessed as a good year for employment generation. About 1.64 crore additional
employment created during this period consisting of about 1.22 crore in rural area and 0.42 crore in
urban area. Female LFPR increased to 18.6 per cent in 2018-19 from 17.6 per cent in 2017-18.
• The quarterly survey of PLFS for the urban sector saw a major proportion of workforce engaged as
regular wage/salaried during the period of January 2019-March 2020.
• Government has given incentive to boost employment under the scheme Atmanirbhar Bharat Rojgar
Yojana. Existing Central labour laws have been rationalized and simplified into four Labour Codes viz.
(i) the Code on Wages, 2019, (ii) the Industrial Relations Code, 2020, (iii) the Occupational Safety,
Health and Working Conditions Code, 2020 and (iv) the Code on Social Security, 2020 to bring these
laws in tune with the changing labour market trends.
• Time Use Survey, 2019 showed females spending disproportionately large time on unpaid domestic
and caregiving services to household members compared to their male counterparts. This explains
the reason for the relatively low level of female LFPR in India. There is a need to promote non-
discriminatory practices at the workplace like pay and career progression, improve work incentives,
including other medical and social security benefits for female workers.
• In the fight against COVID-19, the initial measures of lockdown, social distancing, travel advisories,
practicing hand wash, wearing masks reduced the spread of the disease. The country also acquired
self-reliance in essential medicines, hand sanitizers, protective equipment including masks, PPE Kits,
ventilators, COVID-19 testing and treatment facilities. The world’s largest COVID-19 immunization
program commenced on 16th January, 2021 through two indigenously manufactured vaccines.
• NFHS-5 (Phase-I), results show improvement in immunization coverage for children, institutional
birth, infant mortality rate and under-five mortality rate in most of the selected States. As shown in
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the Chapter 9 of Volume I, this reduction resulted from the roll out of the Pradhan Mantri Jan Aarogya
Yojana under Ayushman Bharat.
• Under PMGKP announced in March, 2020 cash transfers of upto Rs 1000 in two installments of Rs
500 each were paid to existing old aged, widowed and disabled beneficiaries under the National
Social Assistance Programme (NSAP). An amount of Rs 2814.50 crore was released to 2.82 crore NSAP
beneficiaries. An amount of Rs 500 each was transferred for three months digitally into bank accounts
of the women beneficiaries in PM Jan Dhan Yojana, totaling about 20.64 crores. Free distribution of
gas cylinders to about 8 crore families for three months was also undertaken. Limit of collateral free
lending for 63 lakh women SHGs increased from Rs 10 lakhs to Rs 20 lakhs which would support 6.85
crore households.
• A total of 311.92 crore person-days was generated and a total of 65.09 lakh individual beneficiary
works and 3.28 lakh water conversation related works was completed as on 21st January 2021 during
2020-21. Wages under Mahatma Gandhi NREGA was increased by Rs 20 from Rs 182 to Rs 202 w.e.f.
1st April, 2020, which would provide an additional amount of Rs 2000 annually to a worker.
Programmes and Schemes for School Education during 2020-21
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Samagra Shiksha, an overarching programme for the school education sector extending from preschool
to class 12, is being implemented with the broader goal of improving school effectiveness measured in
terms of equal opportunities for schooling and equitable learning outcomes. The vision of the Scheme
is to ensure inclusive and equitable quality education from pre-school to senior secondary stage in
accordance with the SDG for Education. The main outcomes of the Scheme are envisaged as Universal
Access, Equity and Quality including Vocational Education, Inclusive Education, increased use of
Technology and strengthening of Teacher Education Institutions (TEIs). The scheme was launched in
2018-19 with the following major features:
Holistic approach to education: Treat school education holistically as a continuum from Pre-school to
Class 12 with inclusion of support for senior secondary levels and pre-school levels for the first time.
Focus on Quality of Education:
• Enhanced focus on improving quality of education and learning outcomes by focus on the two T’s –
Teachers and Technology.
• Enhanced Capacity Building of Teachers and School Heads, BRC, CRCs.
• Focus on strengthening Teacher Education Institutions like SCERTs and DIETs to improve the quality
of prospective teachers in the system.
• Annual Grant per school for strengthening of Libraries: Library grant of Rs 5,000 to Rs 20,000/-.
• Support for Rashtriya Avishkar Abhiyan to promote Science and Math learning.
Focus on Digital Education:
• Enhanced use of digital technology in education through smart classrooms, digital boards and DTH
channels and ICT infrastructure in schools from upper primary to higher secondary level.
• Support to “DIKSHA”, a digital platform which offers teachers, students and parents engaging
learning material relevant to the prescribed school curriculum.
Strengthening of Schools:
• Improve the Quality of Infrastructure in Government Schools at all levels.
• Enhanced Transport facility to children from classes I to VIII for universal access to schools.
• Composite school grant increased from Rs 14,500-50,000 to Rs 25,000- 1 lakh and to be allocated
on the basis of school enrolment, with atleast 10 per cent allocation for Swachhta activities –
support ‘Swachh Vidyalaya’
Focus on Girl Education:
• Upgradation of Kasturba Gandhi BalikaVidyalayas (KGBVs) from Class 6-8 to Class 6-12.
• Self-defence training for girls from upper primary to senior secondary stage
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• Stipend for Children with Special Needs (CWSN) girls to be provided from Classes I to XII. – earlier
only IX to XII.
• Enhanced Commitment to ‘Beti Bachao Beti Padhao’
Focus on Inclusion:
• Allocation for uniforms under RTE Act enhanced from Rs 400 to Rs 600 per child per annum.
• Allocation for textbooks under the RTE Act, enhanced from Rs 150/250 to Rs 250/400 per child per
annum. QR coded Energized textbooks introduced.
• Allocation for CWSN increased from Rs 3000 to Rs 3500 per child per annum. Stipend of Rs 200 per
month for Girls with Special Needs from Classes 1 to 12.
• Special training for age appropriate admission of out of school children at elementary level.
Focus on Skill Development:
• Vocational education for Class 9-12 as integrated with the curriculum and to be made more practical
and industry oriented.
Focus on Sports and Physical Education
• Sports Education to be an integral part of curriculum and every school will receive sports
equipment’s at the cost of Rs 5000 to Rs 25,000 to inculcate and emphasize relevance of sports.
Focus on Regional Balance:
• Promote Balanced Educational Development
• Preference to Educationally Backward Blocks (EBBs), LWE affected districts, Special Focus Districts
(SFDs), Border areas and the 115 aspirational districts identified by NITI Aayog
• Under the Samagra Shiksha scheme, a National Mission to improve learning outcomes at the
elementary level through an Integrated Teacher Training Programme called NISHTHA (National
Initiative for School Heads’ and Teachers’ Holistic Advancement) was contextualized and made 100
per cent online according to the needs of teaching and learning during the COVID-19 pandemic.
• Padhna Likhna Abhiyan: An adult education scheme has been introduced in FY 2020-21 with
financial outlay of Rs 142.61 crore with a target to make 57 lakh learners’ literate.
• During 2019-20, the Mid-Day Meal (MDM) Programme in schools covered 11.59 crore children
enrolled in elementary classes (I-VIII) in 11.34 lakh eligible schools. During COVID-19 pandemic, it
was decided to provide food grains and pulses, oil etc., (equivalent to cooking cost) as a one-time
special measure to eligible children during the summer vacations.
Initiatives for school going students during COVID-19 pandemic
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1. PM eVIDYA: This initiative was announced for school and higher education under the Atma Nirbhar
Bharat programme in May, 2020. It is a comprehensive initiative to unify all efforts related to
digital/online/on-air education to enable multi-mode and equitable access to education for
students and teachers. The four PM e-Vidya components of school education are:
a. One nation, one digital education infrastructure: Under this component all States/UTs have
free access to a single digital infrastructure i.e, DIKSHA. It is artificial intelligence based,
highly scalable, and can be accessed through a web-portal and mobile application. It
provides access to a large number of curricula linked e-content through several use cases
and solutions such as QR coded Energized Textbooks (ETBs), courses for teachers, quizzes
and others. DIKSHA has experienced more than 800 crore hits since lockdown. In April, 2020,
VidyaDaan portal was launched on Diksha as a national content contribution program that
leverages the DIKSHA platform and tools to seek and allow contribution/donation of e-
learning resources for school education by educational bodies, private bodies, and individual
experts.
b. One class, one TV channels through Swayam Prabha TV Channels: Swayam Prabha DTH
channels are meant to support and reach those who do not have access to the internet. 12
channels are devoted to telecast high quality educational programmes in school education.
The pilot/beta version has been launched in October, 2020.
c. Extensive use of Radio, Community radio and Podcasts: Radio broadcasting is being used
for children in remote areas who are not online. 303 pieces of curriculum-based radio
programmes (for Classes 1-8) have been produced by CIET-NCERT for its dissemination/
broadcast on 12 GyanVani FM Radio Stations, 60 Community Radio Stations, iRadio and Jio
Saavn Mobile apps. 289 Community Radio Stations have also been used to broadcast
content for NIOS for grades 9 to 12. A Podcast of CBSE called Shiksha Vani is being effectively
used by learners of grades 9 to12. It contains over 430 pieces of audio content for all subjects
of grades 9 to 12.
d. For the differently-abled: One DTH channel is being operated specifically for hearing
impaired students in sign language. For visually and hearing-impaired students, study
material has been developed in Digitally Accessible Information System (DAISY) and in sign
language; both are available on NIOS website/ YouTube. 25 NCERT textbooks have also been
converted into DAISY format.
2. Swayam MOOCs for open schools and pre-service education: Online MOOC courses relating to
NIOS (grades 9 to 12 of open schooling) are uploaded on SWAYAM portal. Around 92 courses have
started and 1.5 crore students are enrolled under Swayam MOOCs.
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3. Funding support for digital initiative: To mitigate the effect of COVID-19, ` 818.17 crore is allotted
to states/UTs to promote online learning through digital initiatives, and ` 267.86 crore for online
teacher training to ensure continuous professional development of teachers under Samagra Shiksha
Scheme.
4. National Repository of Open Educational Resources (NROER): NROER is an open storehouse of e-
content. Nearly 17,500 pieces of e-content are available for various school subjects in all grades.
5. PRAGYATA guidelines on digital education was developed with a focus on online/blended/ digital
education for students who are presently at home due to the closure of schools.
6. MANODARPAN: The ‘Manodarpan’ initiative for psychosocial support has been included in the
Atmanirbhar Bharat Abhiyan, as part of strengthening and empowering the human capital to
increase productivity and efficiency through reforms and initiatives in the education sector.
Policy Reforms under Skill Development Initiatives

• Operationalizing Unified Skill Regulator: A significant step to make the skill ecosystem more
dynamic and credible has been undertaken through the operationalization of the unified skills
regulator- National Council for Vocational Education and Training (NCVET). As a first milestone
towards more credible certifications and assessments, the Awarding and Assessment Bodies
guidelines was notified in October 2020. Unique numbered certification has also been approved by
the new regulator. The regulatory capacity is being continuously strengthened through notification
of various standardization processes, regulatory systems, human resources, LMIS and research
capabilities with an aim to create a regulatory institution at par with international standards.
• Pradhan Mantri Kaushal Vikas Yojana 3.0 (PMKVY 3.0): First phase of PMKVY 3.0 was rolled out in
2020-21 with a tentative target to skill 8 lakh candidates including migrants. A paradigm shift in
implementation strategy is adopted by making it demand driven with bottom up approach for
identification and mapping of job roles. District Skill Committees (DSCs) would be playing a pivotal
role under the guidance of State Skill Development Missions in PMKVY 3.0. DSC shall be the focal
point of implementation of PMKVY 3.0 and shall play a major role in preparation of District level
plan, mobilization and counselling of candidates, formation of training batches, monitoring of
quality assurance and post training support. A phase-wise introduction of vocational courses in
schools shall be initiated in coordination with Ministry of Education. This component shall be
implemented for classes 9 to 12 to expose students to skill development avenues.
• Quality Enhancement: Towards enhancing the quality of long-term training programs and providing
a choice to learners about the institutes, the grading of ITIs has been undertaken to improve their
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quality and transparency. Draft grading of ~11000 ITIs have already been published. For ensuring
greater industrial connect, new model of Dual System of Training (DST) and Flexi MoUs is being
implemented under which more than 950 MoUs with enterprises have already been signed.
• Integration of Vocational and Formal education both at school and higher education: The efforts
towards integration of Vocational Education and Training (VET) in general education has received a
big fillip with the NEP, 2020 envisioning giving 50 per cent of school and higher education candidates
exposure to VET over the next 5 years. Some of the key ingredients of VET integration includes
offering vocational courses in schools and equal weightage to vocational courses for admission in
undergraduate courses have been implemented. The draft Credit Framework for vertical and
horizontal mobility from vocational to general and viceversa is being developed. A ‘hub-n-spoke’
model is also being piloted in 2 States with the conceptual framework of early introduction of VET
in schools and an ITI becoming a ‘Hub’ for providing VET related training and exposure to students
of adjoining 5-7 schools. It is hoped that the artificial separation of the education system into formal
and vocational shall end with such enabling frameworks allowing seamless integration.
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ECONOMIC SURVEY & UNION BUDGET:

PRIORITIES & RECOMMENDATIONS

1|P a g e W W W . E D U T A P . C O . I N QUERY? HELLO@EDUTAP.CO.IN / 8146207241

2|P a g e W W W . E D U T A P . C O . I N QUERY? HELLO@EDUTAP.CO.IN / 8146207241

3|P a g e W W W . E D U T A P . C O . I N QUERY? HELLO@EDUTAP.CO.IN / 8146207241

Note: How to Use this Document?

1 Union Budget 2021-22

The key highlights of the Union Budget 2021-22 are as follows:

6 pillars of the Union Budget 2021-22:

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1.1 Health and Wellbeing

Steps being taken for improving health and wellbeing:

1.1.2 Health Systems

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1.1.4 Universal Coverage of Water Supply

1.1.5 Swachch Bharat, Swasth Bharat

1.1.6 Clean Air

1.1.7 Scrapping Policy

1.2 Physical and Financial Capital and Infrastructure

1.2.1 Production Linked Incentive scheme (PLI)

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1.2.4 Roads and Highways Infrastructure

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1.2.5 Railway Infrastructure

1.2.6 Urban Infrastructure

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1.2.7 Power Infrastructure

1.2.8 Ports, Shipping, Waterways

1.2.9 Petroleum & Natural Gas

1.2.11 Increasing FDI in Insurance Sector

1.2.12 Stressed Asset Resolution

1.2.13 Recapitalization of PSBs

1.2.14 Deposit Insurance

1.2.15 Company Matters

1.2.16 Disinvestment and Strategic Sale

1.2.17 Government Financial Reforms

1.3 Inclusive Development for Aspirational India

1.3.3 Migrant Workers and Labourers

1.3.4 Financial Inclusion

1.4 Reinvigorating Human Capital

1.4.1 School Education

1.4.2 Higher Education

1.4.3 Scheduled Castes and Scheduled Tribes Welfare

1.5 Innovation and R&D

1.6 Minimum Government, Maximum Governance

1.7.1 Direct taxes

1.7.1.2 Relief to Senior Citizens

1.7.1.3 Reducing Disputes, Simplifying Settlement

1.7.1.4 Relaxation to NRIs

1.7.1.5 Incentivising Digital Economy

1.7.1.6 Relief for Dividend

1.7.1.8 Supporting ‘Housing for All’

1.7.1.9 Tax incentives to IFSC in GIFT City

1.7.1.10 Ease of Filing Taxes

1.7.1.11 Relief to Small Trusts

1.7.1.12 Labour Welfare

1.7.2 Indirect Taxes

• Nil return through SMS

1.7.2.2 Custom Duty Rationalization

1.7.2.3 Electronic and Mobile Phone Industry

1.7.2.4 Iron and Steel

1.7.2.7 Gold and Silver